Interested in this kind of news? Receive them directly in your inbox. Delivered once a week. Sign Up The risk in financial terms of investing in carbon-emitting technology and infrastructure has been increasingly highlighted over recent years. The Carbon Tracker Initiative think tank and other bodies have done a lot of work to highlight the risk of investing in businesses that do not embrace low-carbon technology, and it has warned investors away from the fossil fuels industry.Now a new paper by the LSE’s Grantham Research Institute forecasts that a global temperature increase of 2.5°C would put at risk $2.5 trillion of the world’s financial assets, or 1.8%. If the rise were limited to 2°C by 2100, the percentage of assets at risk would still be 1.7%.The report’s lead author Professor Simon Dietz said: ‘The news doesn’t come as a surprise for economists whose models have been producing increasingly pessimistic estimates of global warming’s impact on economic growth. Our research illustrates why the risks of climate change to investment returns should be an important issue for all long-term investors like pension funds, as well as financial regulators.’December’s Paris climate change agreement aims to keep temperature rises ‘well below 2°C’, but estimates of the impact of the action promised in Paris suggest temperatures will rise by between 2.7 and 4°C without further action. The report’s worst-case scenario suggests $240 trillion of the world’s financial assets would be at risk, or 17%.The report, published in the academic journal Nature Climate Change, uses economic modelling based on GDP to estimate the impact of climate change on the global economy. It says the likelihood of extreme weather events means today’s assets are effectively overvalued by around $2.5 trillion. ‘There is no scenario in which the risk to financial assets is unaffected by climate change,’ Dietz added, ‘that is just a fiction.’The Carbon Tracker Initiative questioned the methodology behind the estimates. It says the loss of financial capital could be a lot higher and faster than the GDP losses.