I suggest that climate policy could more effectively direct financial investments. The momentum is there.

More than 525 investors, with combined assets worth around US$96 trillion, have signed up to the CDP (formerly the Carbon Disclosure Project). Companies are starting to measure and manage their environmental impacts. The Principles for Responsible Investment, an international investment network supported by the United Nations, has more than 2,000 signatories. Of those, 74% of asset owners and 62% of investment managers acknowledge that climate change is a long-term threat (see go.nature.com/2ikkuph). The Task Force on Climate-Related Financial Disclosures, chaired by Michael Bloomberg, provides detailed guidance on how to measure and respond to climate risks effectively.

Many companies and financial institutions are failing to do this, however. For example, pension funds, which should take a long-term view, are still highly invested in carbon-intensive sectors (see, for instance, go.nature.com/2jqaure).

Whenever large divestments occur — as in the case of the Rockefeller Family Fund, which in 2016 withdrew all its investments in fossil-fuel companies — there are no lasting financial consequences for the divested firms. Furthermore, many carbon-related assets are currently overpriced (‘stranded’) because fossil fuels are being overtaken by renewable energy.

Financial markets need reassurance that investing in support of climate policy will be a winner. A reliable carbon-pricing system, for example, would encourage markets to invest in a low-carbon future.