The global economy could face a 50% loss in GDP between 2070 and 2090 unless immediate policy action on risks posed by the climate crisis is taken, warns a new report by the Institute and Faculty of Actuaries (IFoA) and University of Exeter.
Current climate targets accept large amounts of largely unrecognised nature and societal risk. This includes accepting triggering multiple tipping points where climate change thresholds, once crossed, may be irreversible and limit our ability to control climate change. There is currently no realistic plan in place to avoid this scenario.
Climate and nature risks are driven by human activity and must be addressed now to ensure the security and wellbeing of society. Populations are already impacted by food system shocks, water insecurity, heat stress and infectious diseases. If unchecked, mass mortality, mass displacement, severe economic contraction and conflict become more likely.
'Planetary Solvency - finding our balance with nature' develops a framework for global risk management to address this and show how this approach can support future prosperity. It also shows how a lack of realistic risk messaging to guide policy decisions, has led to slower action than is needed.
The report proposes a novel Planetary Solvency risk dashboard, to provide decision useful risk information to support policymakers to drive human activity within the finite bounds of the planet that we live on.
Sandy Trust, lead author and IFoA Council Member, said: "You can't have an economy without a society, and a society needs somewhere to live. Nature is our foundation, providing food, water and air, as well as the raw materials and energy that power our economy. Threats to the stability of this foundation are risks to future human prosperity which we must take action to avoid.
"Widely used but deeply flawed assessments of the economic impact of climate change show a negligible impact on GDP, rendering policymakers blind to the immense risk current policy trajectories place us in. The risk led methodology, set out in the report, shows a 50% GDP contraction between 2070 and 2090 unless an alternative course is chartered."
Professor Tim Lenton from the University of Exeter and co-author of the report said: "Current approaches are failing to properly assess escalating planetary risks or help control them. Planetary solvency applies the established approaches of risk professionals to our life-support system and finds it in jeopardy. It offers a clear way of seeing global risks and prioritising action to limit them."
Kartina Tahir Thomson, IFoA President said: "Actuaries are experts at dealing with risk and the collaborative nature of our profession means we work for the greater good of society. This new report shows that now more than ever we need to continue working with policyholders, governments, scientists and other stakeholders, to come up with a solution that will address this emergency, for the benefit of all of society."
