The Institute and Faculty of Actuaries (IFoA) has today (12 May) issued a Risk Alert to raise awareness around the financial risks posed by climate change. We are asking all actuaries, whichever field they are working in, to consider how the implications of climate change affect their work, actions and decision making.
The IFoA alert is intended to draw attention to specific areas of actuarial activity, asking members to think carefully about the consequences of actions they are taking. There is an increasing body of evidence demonstrating that climate change represents a material risk to future economic stability.
Nico Aspinall, Chair of the IFoA Resource and Environment Board, said:
Actuaries understand well the importance of keeping up with changes in their profession and helping to develop actuarial science so it remains relevant to the world today. Many clients of actuaries are exposed to climate change risks and our industry has much to offer when helping all stakeholders consider the potential impact. That’s why we’ve issued this alert which will help draw attention to the issue and provide useful information on three types of climate risk: physical, transition and liability."
The global Task Force on Climate-related Financial Disclosures (TCFD) has drafted guidance for companies and financial institutions on how to report climate related financial information. Our climate change alert has been published with this in mind and is one of a series of alerts forming part of our professionalism commitment drive to support members in their work.
Also, in another effort to help our members, the IFoA has published a more detailed guide for actuaries working in the pensions sector. This guide helps shine a light on environmental issues which may be less visible and less well understood than the usual ones considered by pensions actuaries when advising clients.
‘Resource and Environment Issues: A Practical Guide for Pensions Actuaries’ explores the financial implications and impact of a range of issues including climate change, energy, pollution and resource shortages on pension scheme funding. It’s the first such guide which specifically helps pensions actuaries navigate these challenging areas.
Colin Wilson, IFoA President, said:
There is increasing consensus that environmental issues, especially climate change, are an area of financial risk that actuaries should consider in their work. This is already happening in the sectors of general insurance and investment – we believe pensions funding is the logical next step.
We encourage pensions actuaries to take advantage of this valuable resource. It provides practical suggestions for taking account of environmental issues in pensions advice – helping actuaries support trustees and employers in managing risks to pension scheme funding. Our hope is that as well as raising awareness, this guide will encourage discussion and prompt further research.”
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