The huge reserves of coal, oil and gas, held by companies listed in the City of London are "sub-prime" assets posing a systemic risk to economic stability, a high-profile coalition of investors, politicians and scientists warned Bank of England Governor Sir Mervyn King.

In an open letter on Thursday, they tell King that the global drive to reduce carbon emissions could mean billions of pounds of fossil fuel reserves will rapidly lose value and cause a "major problem" for institutional investors and pension funds.

At the most recent U.N. climate change summit in December, 194 of the world's nations agreed to enact legally binding curbs on greenhouse gas emissions within three years to limit global warming to 2 degrees Celsius. But meeting this limit would mean just 20% of existing fossil fuel reserves could be burned, according to recent research.

"These high-carbon assets pose significant strategic challenges for the future prosperity of Britain that just can't be ignored," said investment manager James Cameron, who is a member of the prime minister's business advisory group. "Investors continue to pour cash into unsustainable assets without understanding the risks associated with these investments, such as climate change, local pollution, fossil fuel price volatility, political risk and catastrophes such as Deepwater Horizon."

The letter is also signed by the government's former chief scientific adviser Sir David King, Zac Goldsmith MP, former environment minister John Gummer and 17 others. It urges action to investigate the risk of the "carbon bubble".

Mervyn King chairs the Financial Policy Committee (FPC) set up in 2011 to "identify and take action to remove or reduce systemic risks to protect and enhance the resilience of the U.K. financial system." The letter's authors point out that "five of the top 10 FTSE 100 companies are almost exclusively high-carbon and alone account for 25% of the index's entire market capitalization" and that this risk will exist in other indices and in bank loan books.