Actuaries_ Environmental Policy and the Public Interest

abcd Actuaries, Environmental Policy and the Public Interest Nick Silver and Paul Dickinson, Environmental Research Group Contents  Introduction – why should actuaries be interested in the environment Assets - Climate change and investment policy Liabilities – actuarial modelling and climate change   Why should actuaries be interested in the environment?   Insurance Long term   The big issue Key Skills  Beneficiaries’ interests Intergenerational equity Age Child 33 0 63 30 0 2033 93 60 30 2063 Grandchild -30 Date 2003 Damage > Growth Who cares about climate change? Greenpeace? People in Bangladesh? Small island states? Carbon Disclosure Project signatory investors Abbey National, Allianz / Dresdner, Baillie, Cooperative Insurance Society, Credit Suisse Group, Gartmore, Henderson, ING, Insight Investment, Jupiter, Legal & General, Merrill Lynch Investment Management, Morley Fund Management, Munich Re, Newton Investment Management, Ontario Municipal Employees Retirement Sys.Rabobank, Royal Bank of Scotland, Societe Generale, Storebrand, Swiss Re Asset Management, Threadneedle Investments, UBS Global Asset Management, University Superannuation Scheme Investors, politicians and climate change  “Congratulations on the success of the Carbon Disclosure Project. It has some important messages for all of us. Crucially, it illustrates how the answer to reducing greenhouse gas emissions lies as much with companies and investors as it does with governments, international agencies and the public. I find your report enormously encouraging. I hope the Project goes from strength to strength.” Tony Blair, 17 February 2003 “Our business is to help investors vote with their money” Madeleine Albright, CDP launch 5 March 2003  Investors and systemic risk  “I applaud the project for at least three reasons. First it engages institutional investors constructively with the knowledge deficit and breaks the circularity of ignorance surrounding this systemic risk. CDP is a very positive aspect of shareholder engagement and if there are more shareholders ready to sign up that can only be a very good thing.” Derek Higgs, 17 February 2003 Number of billion dollar weather disasters 7 6 5 4 E vents 3 2 1 80 82 84 86 88 90 92 94 96 Year Source: Watson 2001 98 0 The financial impact of climate change   “If something is true in reality, it must be true in theory” In 2002 droughts shaved 0.75% off Australian GDP 2002  Destruction of the world through unmitigated climate change is against the regulations (in spirit if not in detail) Systemic risk of positive feedbacks  The impact of climate change - problems   World warming up - 1.4 to 5.8 Centigrade by 2100 Sea level rising – 18 to 99cm by 2080   Increased incidence of extreme weather events Water shortages, increased rainfall, flood  Socio-economic factors The impact of climate change - problems  Past no guide to future  Non-linearity  “Sicilian actuary” The impact of climate change - solution  RAMP   Risk analysis and management for projects Actuarial Profession and Institution of Civil Engineers  Manages risk for projects and place financial values on that risk The impact of climate change - solution  Adapt RAMP   Joint project with other professionals Risk identification and analysis   Financial evaluation Risk mitigation abcd Actuaries, Environmental Policy and the Public Interest Nick Silver and Paul Dickinson, Environmental Research Group