Actuaries should be looking to quantify and model the risks around biodiversity loss according to a new policy statement from the Institute and Faculty of Actuaries (IFoA).
The policy recognises the social, economic and financial risks posed by biodiversity loss, and goes on to state that the disappearance or decline of the variety of living things on our planet is global and systemic, with significant implications for both the health and longevity of human populations.
The policy statement commits the IFoA to:
- Advocating for the development of effective policy frameworks worldwide and methods for managing biodiversity risk in the financial services sector
- Using the actuarial skill set and influence to help equip the wider global financial services markets to fully incorporate biodiversity risk
- Supporting actuaries in their understanding of biodiversity risk through education resources and thought leadership content including webinars and blogs
- Advocating for better disclosure of consistent and robust information about biodiversity risk across the financial services sector
Former chair of the IFoA sustainability board and author of the biodiversity policy statement, Nick Spencer says: “There is global recognition that we need to act now to reduce our biodiversity and nature loss in order to avoid irreversible consequences. The actuarial profession is well placed to help businesses and other organisations understand, assess and help mitigate risk.
“This starts with giving our members the right resources and we have recently created a series of blogs and a guide for actuaries on biodiversity and nature-related risk.
“Earlier this month, we published a report which found that economic models underpinning climate scenario modelling in financial services do not always reflect the threat climate change poses to our planet and society. We have been highlighting the importance of these risks for some time through the work of the IFoA’s sustainability board and the biodiversity working party.
“Today’s policy statement lays out our commitment to support biodiversity and we will be accelerating our work in this area because time is not on our side.”
he IFoA supports the aims of the UN Convention on Biological Diversity and the aims of the 2022 Kunming-Montreal Global Diversity Framework.
The IFoA also supports the Taskforce for Nature-related Financial Disclosure (TNFD) Forum and is a signatory to the Sustainable Finance Education Charter, the UN’s Principles for Responsible Investment and the UN’s Principles for Sustainable Insurance.
Spencer adds: “The financial services sector needs to be ready for the changes coming our way. Companies and financial institutions will be required to monitor, assess and disclose the impact of their operations, supply chains and portfolios on biodiversity. The TNFD will publish its risk management and disclosure framework in November.
“The UK’s Financial Conduct Authority says it will consult in the third quarter of this year on proposals to make TNFD reporting mandatory. In the longer term, if requirement to disclose fails to change business practices sufficiently, we believe further regulation or other direct action may be needed.”