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?

The passage highlights the significant impact of climate change and government actions on investors' returns. 1. Governments and companies need to be adequately prepared to face the climate change. The passage discusses "efforts of governments... to deal with it" and how "companies... will face higher taxes and regulatory burdens" or "find it impossible to exploit their known reserves." This implies that both governments (in policy-making) and companies (in business strategy) must anticipate and prepare for these changes to mitigate negative impacts. This assumption is valid. 2. Extreme weather events will reduce the economic growth of governments and companies' in future. The passage states that "Other industries could be affected by the economic damage caused by more extreme weather." While economic damage can certainly hinder growth, the passage only mentions "economic damage" and "affected," not explicitly that it "will reduce the economic growth" of governments and companies. This statement makes a stronger, more definite claim about growth reduction than the passage explicitly supports. This assumption is not directly and definitively supported. 3. Ignoring climate change is a huge risk for investors. The opening sentence states that climate change "could have a big impact on investors' returns." The subsequent sentences detail various negative financial consequences for companies and industries (higher taxes, regulatory burdens, stranded assets, economic damage from extreme weather). All these points illustrate the substantial risks climate change poses to investors. Therefore, ignoring these risks would indeed be a huge risk for investors. This assumption is valid. Based on the analysis, assumptions 1 and 3 are valid. The final answer is C