As the worldwide debate about climate change rages nowhere except in certain American electoral districts, the market is busy making air pollution less profitable.

ExxonMobil will be more transparent on “energy demand sensitivities” resulting from increases in temperature, and what it’s doing to prepare for a lower-carbon future, joining almost all of its competitors. Norway’s sovereign wealth fund is contemplating selling its shares in oil companies because they appear vulnerable to a “permanent drop in oil prices” (keep in mind that the money in its fund came in large part from developing the country’s oil reserves). The World Bank will stop investing in oil and gas exploration in 2019.

So much for debate.

Investors might bring their emotions to markets, but value is determined by price, not passion. Transactions with real consequences quickly disabuse people of their biases (if not, they risk being on the losing side of the next trade). Belief is a detriment to effective investing, as are “facts” that aren’t borne out by objective reality.

That’s not to say that markets are always efficient or accurate. The current valuations of tech companies that have no customers or profits are wildly too high. Venture capital skews cash and attention toward new business propositions that are idiotic, in hopes that one in a thousand will prove itself sane enough to let its initial investors cash out, so it’s more a gambling crap shoot than functioning market…

[Read the entire essay at Medium]

Categories: InnovationEssays