We document that climate-triggered institutional portfolio rebalancing affects S&P 500 firms’ option-implied cost of equity over 2005-2021 by utilizing the incurred climate change price pressure (CCPP) as a channel. Our approach is direct and novel. We estimate stock-level CCPP stemming from physical and transition exposures in a demand-based asset pricing setting. A one-standard-deviation intensification in CCPP increases firms’ cost of equity up to 6% of its average value. Banks and insurance companies primarily contribute to CCPP. Despite the higher cost of equity, firms do not decrease their future climate change exposures, unless media attention to climate change rises.