Chaired by former IFoA President Colin Wilson

Climate change has risen up the financial sector’s agenda. Motivated by concerns that climate-related risks pose a threat to the stability of the global financial system, the Financial Stability Board created the Taskforce on Climate-related Financial Disclosures (TCFD) to encourage better disclosures and facilitate better market pricing. The TCFD has recommended that companies and investors use scenario analysis to understand climate-related risks and opportunities. This will require modelling of the impacts of climate change on macro-economic variables such as interest rates, inflation and equity market returns. Little work has been done in this area to date, and actuaries would seem well-placed to contribute to the development of the field.

The IFoA’s risk alert says all actuaries should consider how climate-related risks affect the advice they are providing. But so far, most attention has focused on the impact on investments and general insurance liabilities. What about the impact on long-term pension and insurance liabilities? How might we model the impact on key assumptions such as long-term bond yields and inflation? 

Four IFoA working parties – spanning pensions, investment, life insurance and general insurance – are considering these questions. However, they recognise that this is an emerging topic where we can gain from each other’s knowledge and perspectives.