The effects of climate change are showing up earlier and with more severity than anticipated, with the likelihood of extreme events that were once rare now increasing.
'Climate Scorpion – the sting is in the tail' is the IFoA’s third report in collaboration with climate scientists. It reveals that climate risks are intricate, interconnected, and could jeopardize the foundation of our society and economy.
It demands an urgent, realistic evaluation of the risks associated with climate change, taking into consideration the entire spectrum of potential outcomes, including critical turning points, plausible worst-case scenarios, and the risk of complete failure – the threshold at which our global society can no longer effectively adapt to climate change.
It introduces the concept of Planetary Solvency to assist in making long-term policy decisions. Similar to financial solvency assessments that analyze a financial entity's ability to fulfill obligations, Planetary Solvency would merge nature, climate, and societal risk assessments to evaluate the risks to the ecosystem services that support our society, both presently and in the future.
Sandy Trust, Lead author and Past-Chair, IFoA Sustainability Board, said: “There is an urgent necessity to provide policymakers with practical appraisals of climate risk if we desire to see enduring policies and decisive steps to advance the energy shift. In addition to taking these risks into account, we need to invest in educating both the public and policymakers about the positive tipping points or behavioral changes that would facilitate a quicker transition.
“As actuaries, we have an obligation to actively address the sustainability challenge. Our key expertise lies in analyzing data to comprehend the range of uncertainty surrounding future assumptions, considering risks and worst-case scenarios. The guidance we offer influences the extent of action and swiftness needed to steer clear of those scenarios. In this report, we examine the concept of Planetary Solvency because we believe these methods, commonly used in the financial sector, could and should be adapted to effectively manage climate risk.”
