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  Why does it matter?

  Why does it matter?

  • Energy is a critical pillar for both sustainable development and the Paris agenda. SDG 7 focuses broadly on access to energy as well as decarbonisation of the energy sector. Its 6 targets include: 

    • Increasing access to electricity 
    • Increasing the share of renewables in the energy mix 
    • Improving energy efficiency 
    • Enhancing international financial flows for energy research and technology 
    • Expanding energy infrastructure in developing countries 

    The 2021 SDG 7 policy brief outlined how action on sustainable energy was crucial to meet all of the SDGs and underpins economic development. Whilst progress is being made, globally we are not yet on track to achieve SDG 7 by 2030. For example, access to electricity has improved since 2010 (when 1.2bn people worldwide lacked access to electricity) but due to the challenges of reaching the some areas 733m people are still without electricity including 31% of primary schools in Sub-Saharan Africa. Similarly on decarbonisation whilst total renewable energy consumption has increased, the share of renewables in the overall energy mix is still only 18%. Inequality in energy consumption is also apparent with energy consumption of the richest 5% exceeding that of the poorest 50% of the world’s population. An additional challenge is that the production of renewable energy components, such as batteries and wind turbines, is energy intensive and this often comes from fossil-fuel sources.

• Supporting initiatives

  Supporting initiatives

  • In September 2021 the UN secretary general convened a high-level dialogue on energy, focused on implementing the energy related 2030 goals and supporting the Paris agreement. The output of this meeting was the global roadmap for accelerated SDG 7 action which identified 5 actions (closing the energy access gap, rapidly decarbonising the energy system, mobilising adequate and predictable finance, leaving no one behind and harnessing innovation, data and technology) and set milestones for both 2025 and 2030. These milestones include: 

    • No new coal power plants in the pipeline after 2021, with a phase out of coal power plants in the OECD by 2030 and globally by 2040 
    • Doubling annual investment and creating 30 million jobs in renewable energy and energy efficiency globally by 2025 raising to 60 million jobs by 2030 
    • Triple the renewable power capacity by 2030 

    Progress towards the targets can be tracked and examined on a per country basis with the Tracking SDG 7: The Energy Progress Report Dashboard which is a collaborative effort across five custodian agencies; World Bank, World Health Organisation (WHO), International Energy Agency (IEA), International Renewable Energy Agency (IRENA) and UN statistics division (UNSD). The latest tracking report highlighted that whilst progress was being made it still falls short of what is required to achieve SDG 7 by 2030. 

    Recognising the need to mobilise all sectors to support sustainable energy, Sustainable Energy for All was established by the UN in 2011 with 3 objectives: providing universal access to modern energy, doubling the global rate of improvement in energy efficiency and doubling the share of renewables in the global energy mix. Now an independent organisation, they operate 12 programmes across a diverse range of sectors from financing to governance, regulation, and healthcare.

    World Energy Trilemma Index prepared annually by the World Energy Council ranks the energy performance and suggests areas for improvement of 127 countries against 3 criteria. These criteria are Energy security, Energy Equity and Environmental sustainability, all of which it considers necessary for healthy energy systems.

• Importance for actuarial practice

  Importance for actuarial practice

  • Understanding the general economic, commercial, and regulatory environment in which businesses operate is a key aspect of the actuarial control cycle. Energy is critical to all economic production, meaning that understanding the global direction of travel helps us identify both risks and opportunities for our clients and employers. 

    There are a number of connections between actuarial practice and SDG 7: 

    • For general insurers the enabling effect of underwriting activity on economic production means that an awareness of what is required from the energy sector to meet climate targets is crucial. This helps make decisions about what should be underwritten and what should not to meet SDG 7 commitments including what constitutes a credible transition pathway. 
    • For life insurers, pensions, and investment organisations the role is as an asset owner and steward, ensuring adequate flow of capital into appropriate sectors and using engagement activity to meet SDG 7 commitments. On the liabilities side, achieving SDG 7 has implications for mortality and morbidity of insureds. 
    • For risk management it is important to understand plausible energy transition pathways in order to properly carry out climate change scenarios, assess the risk of stranded assets and understand the impacts on related economic sectors. Understanding the risk characteristics of new products and assets will be necessary.

• Relationships to other goals

  Relationships to other goals

  • SDG 7 policy briefs are produced annually to support the implementation and delivery of the SDGs. The 2022 report focused on the role energy plays in education (SDG4), gender equality (SDG 5) and sustainable land use (SDG 15). These linkages as well as notable relationships with other SDGs is outlined below: 

    • SDG 1 No poverty – Energy access is important for improving productivity which can increase incomes and reduce poverty. Energy poverty has consequences for meeting basic human needs including healthcare. Energy poverty can be an obstacle to climate action, if poverty pushes households to revert to, or continue, using charcoal, kerosene or wood for heating & cooking. 
    • SDG 3 Good health and wellbeing – Access to energy is key to achieving good hygiene and sanitation as well as improved comfort from heating and cooling domestic buildings. According to the 2022 SDG progress report 2.4 billion people globally rely on inefficient and polluting cooking systems which contribute to mortality from household and ambient air pollution. 
    • SDG 4 Quality education – Access to energy in schools improves the quality and accessibility of education, it is key for digital connectivity and access to IT as well as ensuring a comfortable learning environment through heat, cooling, light and safe water with electrification linked to improved educational outcomes. 
    • SDG 5 Gender equality – Lack of energy access disproportionately affects women due to traditional gender roles, including time spent domestically, limiting access to education and employment opportunities as well as exposure to indoor air pollution having negative health impacts. SDG 7 is one of a minority of SDGs that lacks specific gender targets. 
    • SDG 8 Decent work and economic growth & SDG 9 Industry, innovation, and infrastructure – A landmark paper published in Joule compared the cost trajectories of renewable energies and fossil fuels, finding that the falling costs of renewable technologies results in rapid transition scenarios that are likely to be much cheaper than continued fossil fuel dependence by c.$12trillion. Here infrastructure costs are more than offset by lower energy costs leading to a net economic benefit on Gross Domestic Product (GDP). Earlier references have highlighted a role of deploying renewable energy is job creation. 
    • SDG 13 Climate action – The ability to reduce greenhouse gas emissions and meet the Paris Agreement Commitment to limit warming to 1.5°C depends on transforming our energy systems and expanding electricity generation from renewable sources. The IEA Roadmap to Net Zero: A Roadmap for the Global Energy Sector sets out a tight but plausible transition pathway to meet our climate goals with an update provided in 2022 which highlights the changing landscape and interactions with energy security. 
    • SDG 15 Life on land – Land can be used for many purposes with energy systems only one of a variety of possible uses. Whilst fossil fuel systems tend to have greater environmental impacts than renewables, the environmental impacts of renewables (such as biodiversity loss, mining for minerals and end of life recycling/recovery) are important considerations.