Climate change will blow a $2.5tn hole in global financial assets, study warns

The Guardian reports: 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 entire assets, and wreck the global economy.

However, 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, at 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.” But he said awareness in the financial sector was low.

Mark Campanale, at the thinktank Carbon Tracker Initiative, said the actual financial losses from unchecked global warming could be higher than estimated by the financial model behind the new study: “It could be a lot worse. The loss of financial capital can be a lot higher and faster than the GDP losses [used to model the costs of climate change in the study]. Just look at value of coal giant Peabody Energy: it was worth billions just a few years ago and now it is worth nothing.” [Continue reading…]

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