The impacts of climate change, such as heat, drought, flood, and famine, are evident all around us. To avoid severe consequences, the International Energy Agency states that the consumption of oil, coal, and natural gas needs to decrease rapidly, while clean energy sources like wind and solar power need to expand. However, the stock market seems to be disregarding this message. Instead of transitioning away from oil, major oil companies like Exxon Mobil and Chevron are making significant acquisitions to increase their oil reserves. This contradiction between scientific evidence and stock market behavior raises questions about the market’s short-sightedness.

The scientific consensus on climate change is clear, with frequent studies pointing to its alarming consequences. The most recent report by the International Energy Agency highlights the urgent need to shift from fossil fuels to alternative energy sources. Another study warns that global warming could exceed the ambitious goals of the Paris climate agreement within the next five years, resulting in catastrophic events. Governments, companies, and individuals must take immediate action to reduce carbon emissions. However, the stock market does not seem to reflect these urgent calls for action.

Although significant investments are being made in renewable energy projects, the stock market’s response has been negative. Exchange-traded funds like the iShares Global Clean Energy E.T.F. have experienced substantial losses this year, reflecting investors’ lack of enthusiasm for clean energy companies. Rising interest rates and reduced consumer enthusiasm have dampened stock valuations for renewable energy companies. Solar and wind companies, such as SolarEdge and Orsted, have experienced sharp declines in their stock prices due to various factors, including reduced demand and project cancellations.

In contrast, big oil companies have not been deterred. Despite declining profits and revenue, Exxon and Chevron remain focused on oil. Their recent acquisitions demonstrate their long-term commitment to the fossil fuel industry. These companies are banking on the continued demand for oil and the potential for geopolitical conflicts to drive up prices. Although scientific evidence suggests that oil may become a stranded asset in the future, the stock market consensus still sees a profitable future for big oil.

It is challenging to interpret the signals sent by the stock market. While it is not infallible, the market aggregates the views of numerous individuals who determine the prices of specific offerings. However, these prices can fluctuate, and the market may not always foresee future developments. While discouraging, the stock market’s response should not be dismissed entirely. Ultimately, it is crucial for investments to generate long-term profitability.