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All Swans are Black in the Dark is a piece of research that helpfully illustrates how the short- term focus of financial analysis does not shed light on long term risks.

In 2006 a leading group of investors established the UN-backed Principles for Responsible Investment (PRI). At the time of writing, the PRI has nearly 1,200 signatories representing over $70trn. The PRI works:

  • To understand the investment implications of environmental, social and governance (ESG) factors
  • To support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

Leading organisations are starting to take a strategic response to ESG and sustainability, and are considering changes needed to products and market positioning, as well as to processes, operations and supply chains. Read more about ESG investing.

From 2020, PRI signatories must report how they have considered specific climate-change risks in their portfolios.

The financial risk of climate change has emerged as one of the primary issues that the PRI seeks to address. The Inevitable Policy Response (IPR) work involves PRI, Vivid Economics and Energy Transition Advisors. They are building a Forecast Policy Scenario (FPS) which lays out the policies that are likely to be implemented in the 2020s and quantifies the impact of this response on the real economy and financial markets. Much climate scenario work seeks to avoid specific forecasts so the FPS is particularly helpful in this regard.

In Europe the Institutional Investors Group on Climate Change (IIGCC) is a membership organisation of investors focusing on climate change. The Net Zero Investment Framework for Consultation is the first publication of the IIGCC’s Paris AliIGCgned Investment Initiative. Equivalent organisations to IIGCC are Ceres in North America, and C and AIGCC in Asia.

Leading asset owners are seeking to manage the strategic financial risks of climate change. This can lead to designing investment mandates (as a client) or products (as an investment manager) to meet that goal. Early pension fund movers include HSBC Bank (UK) Pension Scheme (TCFD Statement), NEST (Note to members and climate change policy), and the Environment Agency Pension Fund (EAPF).

Outside the UK examples include:

As well as strategic risk, strategic asset allocation and portfolio construction, investors are increasingly using their voting power to influence companies. Climate Action 100+ is a global investor initiative that seeks to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.

The Net-Zero Asset Owner Alliance is a growing group of international institutional investors delivering on a commitment to transition their investment portfolios to net-zero greenhouse gas emissions by 2050. Launched in September 2019 with no UK asset owners as m embers, Aviva and the Church Commissioners have since joined the Alliance.

The Investment Integration Project (TIIP) addresses system issues for investors. They continue to publish helpful reports. For example, Assessing System Level Investments is a guide to help asset owners assess their managers’ effectiveness in addressing systemic social and environmental risks and rewards.

The Transition Pathway Initiative (TPI) is a global, asset-owner led initiative that assesses companies' preparedness for the transition to a low carbon economy.

All Swans are Black in the Dark is a piece of research that helpfully illustrates how the short-term focus of financial analysis does not shed light on long-term risks.

The 2° Investing Initiative (2DII) is an international, non-profit think tank working to align financial markets and regulations with the Paris Agreement goals.

Understanding Physical Climate Risks and Opportunities, published by the IIGCC and lead-authored by Acclimatise, seeks to help investors understand physical climate risks and how they are measured. This guidance provides an overview of the physical climate science and illustrates how physical risks are manifesting and causing financial consequences. It provides investors with practical guidance on how they can begin to analyse, assess and manage the risks and opportunities presented by physical climate hazards, both acute and chronic.

Stranded assets are assets that have suffered a premature write-down in value and this may be caused by environment-related risks. You can see a paper that explores stranded assets On the IADB website.

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Events calendar

  • The Growth Mindset for Actuaries

    13 October 2021 - 8 December 2021

    Fully booked.

    This practical course is aimed at actuaries at any stage of their career who want to develop their own growth mindset and apply it to their work setting and personal or professional lifelong learning. The content of the course builds on the lecture given by Dr Helen Wright on Growth Mindset as part of the President’s 2021 Lecture series, and will be delivered over a period of 2 months, from mid-October to early December.

  • Spaces available

    The role of actuaries within the health sector varies considerably from one country to another, due to differences in the local evolution of health systems and the funding models for health services. 

  • Spaces available

    This paper outlines key frameworks for reserving validation and techniques employed. Many companies lack an embedded reserve validation framework and validation is viewed as piecemeal and unstructured.  The paper outlines a case study demonstrating how successful machine learning techniques will become and then goes on to discuss implications.  The paper explores common validation approaches and their role in enhancing governance and confidence.

  • Spaces available

    Content will be aimed at all actuaries looking to understand the issues surrounding mental health in insurance and in particular those looking to ensure products and processes widen access for, and are most useful to, those experiencing periods of poor mental health.
     

  • Spaces available

    The IFoA Policy Briefing 'Can we help consumers avoid running out of money in retirement' examined the benefits of blending a lifetime annuity with income drawdown. Panellists, including providers and advisers, will look at the market practicalities of taking the actuarial theory through into the core advice propositions used by IFAs and Fund Managers. They will share a number of practical issues such as investment consequences before and after retirement and the level of annuity that is appropriate and answer questions from the audience.

  • Speech from the Governor of the Bank of England, Andrew Bailey

    Lincoln's Inn The Treasury Office, London WC2A 3TL
    1 December 2021

    The IFoA is pleased to be hosting the Governor of the Bank of England, Andrew Bailey, to deliver a speech on delivering policyholder protection in insurance regulation.

    The speech will be presented to an in-person audience, and simultaneously live-streamed, at 14.00 on Wednesday 1st December.

  • The Many Faces of Bias

    2 December 2021

    Spaces available

    This webinar looks at the many types of biases, both conscious and unconscious and the impacts they can have in the workplace.  Raising our own awareness and understanding of the issues can help us avoid the pitfalls of unconscious bias in particular.  We’ve all heard the phrase ‘office banter’ but are we sure that’s how those on the receiving end perceive it and is it ok to go along with it?

  • Spaces available

    Actuaries need to take action now - but how?  With a focus on climate change, this session will provide informed insight to enable you to improve your knowledge and understanding of the issues involved, demonstrate how it will impact advice to your clients, and highlight prospective opportunities for actuaries within pensions and wider fields.

  • Spaces available

    Pension scams have become more prevalent as a result of the pandemic, and Trustees have increased responsibilities to protect members, which means that actuaries need to be in a position to provide advice in this area. Our specialist panel will include a professional trustee, an IFA and head administrator, two of whom are members of PASA.

  • Spaces available

    The covid-19 pandemic creates a challenge for actuaries analysing experience data that includes mortality shocks.  To address this we present a methodology for modelling portfolio mortality data that offers local flexibility in the time dimension.  The approach permits the identification of seasonal variation, mortality shocks and late-reported deaths.  The methodology also allows actuaries to measure portfolio-specific mortality improvements.  Results are given for a mature annuity portfolio in the UK

  • Spaces available

    In this webinar, the authors of the 2021 Brian Hey prize winning paper present a new deep learning model called the LocalGLMnet. While deep learning models lead to very competitive regression models, often outperforming classical statistical models such as generalized linear models, the disadvantage is that deep learning solutions are difficult to interpret and explain, and variable selection is not easily possible.

  • Spaces available

    The dominant underwriting approach is a mix between rule-based engines and traditional underwriting. Applications are first assessed by automated rule-based engines which typically are capable of processing only simple applications. The remaining applications are reviewed by underwriters or referred to the reinsurers. This research aims to construct predictive machine learning models for complicated applications that cannot be processed by rule-based engines.

  • Spaces available

    With the Pension Schemes Act 2021 requiring a long term strategy from Trustees and sponsors, choosing a pensions endgame strategy has become even more critical. However, it is important that the endgame options available are adequately assessed before choosing one. With an ever-increasing array of creative and innovative options available, this decision may not be straightforward.