We build a nationally representative sample of retirement savers in Sweden to study how climate polarizaton affects individual investment decisions. After the record-breaking heat wave of 2018, respondents in regions with strong support for a right-wing, anti-climate party grow less concerned about climate change, while respondents outside these regions grow more concerned. Those growing more concerned rebalance their retirement portfolios toward climate-friendly mutual funds; those growing less concerned rebalance out of these funds, but to a smaller degree. Financial sophistication and inertia interact with political polarization in driving these effects.

A major concern regarding green investing is that it may crowd out political support for government interventions targeting negative externalities. We test the validity of this concern in a preregistered experiment shortly before a real referendum on a climate law with a representative sample of the Swiss population (N = 2,051). We find that the opportunity to invest in a climate-conscious fund does not reduce individuals’ support for climate regulation. Our experimental results are consistent with actual voting and donation behavior across Switzerland. We conclude that the spillover effects of sustainable investing on individual political behavior are limited.

How special interests shape legislative decisions is a fundamental question in political economy. In this paper, we examine the influence of carbon-emitting corporations on legislative voting behavior on climate issues and the impact of the votes on firm value. Using a comprehensive sample of votes on contested climate legislation in the US House of Representatives and Senate, we find that politicians with high carbon dependency—those receiving more campaign contributions from carbon-emitting firms—are more likely to cast climate-skeptic votes. This relation is stronger when politicians face greater electoral pressure. Using the redistribution of campaign contributions following the narrow defeat of incumbent representatives to generate plausibly exogenous shocks to their elected peers' carbon dependency, we find that the relation is likely causal. We further find evidence that carbon-emitting firms benefit from their connected politicians casting climate-skeptic votes.