Sustainable Energy

Global warming risks trillions: Study

Anmar Frangoul | Special to
Jonas Gratzer | LightRocket | Getty Images

A new study has found that an average of $2.5 trillion of global financial assets could be "at risk" from the effects of climate change.

The paper – from researchers at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science and Vivid Economics – looked at the financial impact of the planet's mean surface temperature increasing by 2.5°C above pre-industrial levels by 2100. The study was published in the journal Nature Climate Change on Monday.

Its authors also found that because of the "uncertainties" inherent in estimating "climate Value at Risk", there was a one percent chance that warming of 2.5°C could put 16.9 percent of global assets – $24 trillion – at risk.

"Our results may surprise investors, but they will not surprise many economists working on climate change because economic models have over the past few years been generating increasingly pessimistic estimates of the impacts of global warming on future economic growth," Simon Dietz, the paper's lead author, said in a news release.

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The value of financial assets could be impacted by climate change via a range of factors such as "extreme weather events" and a reduction in labor productivity and wages.

"A good example of how climate change can affect capital through extreme weather events is through the destruction of buildings and structures in storms," Alex Bowen, principal research fellow at the Grantham Research Institute on Climate Change and the Environment, told CNBC in a phone interview.

"Human productivity… does seem to be affected by temperatures outside the normal ranges that people are acclimatized to," Bowen went on to add.

Keeping warming to 2°C was seen by the study's authors as being important.

"When we take into account the financial impacts of efforts to cut emissions, we still find the expected value of financial assets is higher in a world that limits warming to 2°C," Dietz said.

"This means risk-neutral investors would choose to cut emissions, and risk-averse investors would be even more keen to do so," he added.

The paper comes in the wake of last year's landmark COP21 meeting in Paris last year.

There, 195 countries agreed to make sure global warming stayed "well below" 2°C and to "pursue efforts" to limit the temperature rise to 1.5°C.

While stating that the estimate formed by his team was the "most comprehensive" to date, Dietz said it was also important to note that there were "huge uncertainties and difficulties in performing economic modelling of climate change, so this should be seen as one of the first words on the topic, not the last."