
Current climate policies risk
catastrophic societal and economic impacts
Institute and Faculty of Actuaries
16 January 2025
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).
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’, commissioned in partnership with the University of Exeter, 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 of the University of Exeter 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.”
Summary Risk Outlook
Increasingly severe climate and nature driven impacts are highly likely, including fires, floods, heat and droughts. This is a national security issue as food, water and heat stresses will impact populations. If unchecked then mass mortality, involuntary mass migration events and severe GDP contraction are likely.
Planetary Solvency defines Catastrophic impacts as:
• Economic contraction, GDP loss of over 25%.
• Mass human mortality events resulting in over 2 billion deaths.
• Warming of 2°C or more, triggering high number of climate tipping points.
• Breakdown of some critical ecosystem services and Earth Systems.
• Major Extinction Events in multiple geographies.
• Ocean circulation severely impacted.
• Severe socio-political fragmentation in many regions, low lying regions lost.
• Heat and water stress driving mass migration of billions.
• Catastrophic mortality events from disease, nutrition, thirst and conflict.
Policy Recommendations
It will be overwhelmingly positive economically to avoid Planetary Insolvency. An urgent policy response is required as our current market led approach to mitigating climate and nature risks is not delivering.
This should include:
1. Implementing annual Planetary Solvency risk assessments, leveraging the RESILIENCE principles, reporting to the UN Security Council.
2. Creating a function with responsibility for producing Planetary Solvency assessments, housed in an appropriate body such as the IMF or OECD.
3. Considering the need for systemic risk officers at supra-national, national and sub-national levels to enhance systemic risk management capability.
4. Rapidly implementing policy recommendations to reduce risk such as National Transition Plans, Nature Positive Pathways and alternative economic models.
5. Developing appropriate tracking of delivery of solutions to mitigate risk, including oversight of progress, clear accountability and near-term action.
LINK TO REPORT Planetary Solvency – finding our balance with nature
https://actuaries.org.uk/document-library/thought-leadership/thought-le…
SUMMARY: https://actuaries.org.uk/planetary-solvency
SOURCE: https://actuaries.org.uk/media-release/current-climate-policies-risk-ca…

Last updated 20 January 2025