A new economic modelling report shows that climate change could strip the world's economy of $2.5 trillion (£1.7 trillion), but that global efforts to limit it could reduce this financial burden by $315 billion.
The report, carried out by the London School of Economics, and published in the journal 'Nature Climate Change' also revealed a worst-case scenario, in which the cost of climate change could soar to $24 trillion, which is a staggering 17% of total global assets, and some researchers still claim these figures are too conservative.
The researchers on the study said that the results clearly show that the finance sector needs to take notice of the threat and that, slowly, this is starting to happen in some areas. Professor Simon Dietz from the London School of Economics, stated: “Our work suggests to long-term investors that we would be better off in a low-carbon world. Pension funds should be getting on top of this issue, and many of them are.”
The researchers explained that, if climate change is allowed to continue at current levels, the world’s assets, including coal, oil and gas, are hugely overvalued – and this is where the massive losses will be felt. Investors in these areas and companies with interests in natural resources are likely to be among the worst hit. Professor Dietz continued: “There is no scenario in which the risk to financial assets are unaffected by climate change. That is just fiction. There will be winners and losers."
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