For the same increase in firm climate risk, insurers decrease holdings by 2% if the firm is held via bonds, yet increase by 4.6% if held indirectly via CLOs. Using the staggered rollout of climate disclosures, we show increased supervision of insurer portfolios injects capital into shadow markets. CLO managers receiving this capital launch new funds, and also include brown firms in their portfolio. Firms receiving the capital flow via CLOs increase leveraged loan issuance, and engage in greater polluting activities. By pushing insurers towards shadow markets, climate supervision can lead to the very outcome it intended to mitigate.