"Neither public policies nor markets reflect the risks of a warmer world".

Economist: “Markets can misprice risk, as investors in subprime mortgages discovered in 2008. Several recent reports suggest that markets are now overlooking the risk of “unburnable carbon”.” ….”If governments were determined to implement their climate policies, a lot of that carbon would have to be left in the ground, says Carbon Tracker, a non-profit organisation, and the Grantham Research Institute on Climate Change, part of the London School of Economics. Their analysis starts by estimating the amount of carbon dioxide that could be put into the atmosphere if global temperatures are not to rise by more than 2°C, the most that climate scientists deem prudent. The maximum, says the report, is about 1,000 gigatons (GTCO2) between now and 2050. The report calls this the world’s “carbon budget”.
Existing fossil-fuel reserves already contain far more carbon than that. According to the International Energy Agency (IEA), in its “World Energy Outlook”, total proven international reserves contain 2,860GTCO2—almost three times the carbon budget. The report refers to the excess as “unburnable carbon”.
….Worries about mispricing are cropping up in the markets themselves. In April Citi Research looked at Australian mining companies and concluded that “investors who strongly believe in ‘unburnable carbon’ would find it more productive to actively tilt their portfolios” (ie, sell fossil-fuel firms). In January, HSBC Global Research argued that “if lower demand led to lower oil and gas prices…the potential value at risk could rise to 40-60% of market cap.” The 200 largest listed companies had a market capitalisation of $4 trillion at the end of 2012, so this is a huge amount. HSBC added: “We doubt the market is pricing in the risk of a loss of value from this issue.”
Carbon Tracker says regulators should require firms to disclose the amount of carbon in their fuel reserves. Credit-rating agencies should address climate change as part of their efforts to tackle systemic risk. And firms ought to explain how their activities are compatible with government emissions targets. But so long as governments are ambivalent about those targets, it seems fruitless to demand more of companies and markets. At the moment neither public policies nor markets reflect the risks of a warmer world.”