Do climate risks matter for green investment?

We consider the degree to which climate disasters influence investor behavior. Using data on events such as hurricanes and floods, we show that disasters prompt investors to pay more attention to socially responsible investing and invest more in mutual funds with an environmental focus. Consistent with a salience explanation, this effect is more pronounced for disasters that attract the most attention. The funds receiving the increased inflows do not have higher riskadjusted returns before climate disasters, so there is no evidence to support a return-chasing explanation. Moreover, investors do not gain excess returns from their climate disaster-induced investment decisions.