Climate change could cut the value of the world’s financial assets by $2.5tn (£1.7tn), according to the first estimate from economic modelling.
In the worst case scenarios, often used by regulators to check the financial health of companies and economies, the losses could soar to $24tn, or 17% of the world’s assets, and wreck the global economy.
The research also showed the financial sense in taking action to keep climate change under the 2C danger limit agreed by the world’s nations. In this scenario, the value of financial assets would fall by $315bn less, even when the costs of cutting emissions are included.
“Our work suggests to long-term investors that we would be better off in a low-carbon world,” said Prof Simon Dietz of the London School of Economics, the lead author of the study. “Pension funds should be getting on top of this issue, and many of them are.” He said, however, that awareness in the financial sector was low.