Based on the 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.

On the basis of the above passage, the following assumptions have been made:
1. Governments and companies need to be adequately prepared to face the 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?

Question

Based on the 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.

On the basis of the above passage, the following assumptions have been made:
1. Governments and companies need to be adequately prepared to face the 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?

Accepted Answer

Correct Option: 1, 2 and 3 Let us evaluate the assumptions based on the passage. Assumption 1 is valid because the passage notes that a changing climate and government efforts will impact investors and companies, implying that adequate preparation is necessary for both governments and businesses. Assumption 2 is valid since extreme weather events cause economic damage to industries and economic growth. Assumption 3 is valid because companies facing higher taxes, regulatory burdens, and stranded assets directly pose risks to investors' returns, making the ignoring of climate change a huge risk. Therefore, all three assumptions are valid, and option 3, 2, and 1 are fully supported.

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