(Bloomberg) -- The world’s insurers, banks and pension funds are "inherentlysusceptible" to threats from climate change and must makeadjustments, from shifting investment toward environmentallyfriendly industries to revamping strategies to reduce risk, saidthe Global Risk Institute.

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“Climate change is a top priority that must be addressedsystemically and without delay," concludes a report by theToronto-based group that researches risks to the global financialservices industry.

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Climate change poses “a real and potentially devastating risk”to investment portfolios, including $35.4 trillion overseen by theworld’s pensions. Global investment portfolios may lose up to 45percent due to short-term shifts in climate sentiment, theinstitute said, citing a 2015 University of Cambridge study. Halfthose losses could be avoided by reallocating portfolios, thoughhalf would be unhedgeable without system-wide action on climatechange.

“To avoid financial liability and mitigate climatechange-related risks, pension funds must diversify their portfoliosacross all sources of risk and increase allocations to low carbontechnologies and green energy,” the institute said.

Insurers, whose insurance losses from weather events swelledfrom an annual average of about $10 billion to around $50 billionin the past decade, face threats from physical events, risks tiedto liability and “transition risk" from adjusting to a lower-carboneconomy, the report said.

Climate change poses a direct risk to bank operations andlending, with real estate, infrastructure and agriculturalbusinesses particularly threatened, the report said. Banks shouldscale back exposure to “high carbon industries” and assets that maysuffer in tackling climate change and pursue “new greenopportunities” in commercial and investment banking, according tothe report.

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