On the basis of the above passage, the following assumptions have been made: 1. Governments and companies need to be adequately prepared to face climate change. 2. Extreme weather events will reduce the economic growth of governments and companies in future. 3. Ignoring climate change is a huge risk for investors. Which of the above assumptions is/are valid?

Passage

A changing climate, and the eventual efforts of governments (however reluctant) to deal with it, could have a big impact on investors’ returns. Companies that produce or use large amounts of fossil fuels will face higher taxes and regulatory burdens. Some energy producers may find it impossible to exploit their known reserves, and be left with “stranded assets” — deposits of oil and coal that have to be left in the ground. Other industries could be affected by the economic damage caused by more extreme weather — storms, floods, heat waves and droughts.

QUESTION

CSAT

Easy

Comprehension

Prelims 2019

On the basis of the above passage, the following assumptions have been made:

Governments and companies need to be adequately prepared to face climate change.
Extreme weather events will reduce the economic growth of governments and companies in future.
Ignoring climate change is a huge risk for investors.

Which of the above assumptions is/are valid?

Select an option to attempt

Explanation

Statement 1 is correct. This assumption is valid because the passage discusses how climate change and related governmental actions (such as taxes and regulations) will significantly impact companies. Preparation is implied as necessary to mitigate these effects.

Statement 2 is incorrect. While the passage states that extreme weather could cause economic damage to industries, it does not explicitly link this to a reduction in overall economic growth. The inference about reduced economic growth is broader than what is directly stated in the passage.

Statement 3 is correct. The passage emphasizes the risks climate change poses to investors, such as stranded assets, higher taxes, and regulatory burdens. This supports the idea that ignoring it represents a significant risk.

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