Actuaries, Environmental Policy and the Public Interest

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Actuaries, Environmental Policy and the Public
Interest
abcd

• Nick Silver and Paul Dickinson, Environmental
  Research Group

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Contents

• Introduction why should actuaries be interested
  in the environment
• Assets - Climate change and investment policy
• Liabilities actuarial modelling and climate
  change

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Why should actuaries be interested in the
environment?

• Insurance
• Long term
• The big issue
• Key Skills
• Beneficiaries interests

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Intergenerational equity
Age 33 63 93
Child 0 30 60
Grandchild -30 0 30
Date 2003 2033 2063
Damage gt Growth
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Who cares about climate change?

• Greenpeace?
• People in Bangladesh?
• Small island states?

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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

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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

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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

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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

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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

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The impact of climate change - problems

• Past no guide to future
• Non-linearity
• Sicilian actuary

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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

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The impact of climate change - solution

• Adapt RAMP
• Joint project with other professionals
• Risk identification and analysis
• Financial evaluation
• Risk mitigation

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Actuaries, Environmental Policy and the Public
Interest
abcd

• Nick Silver and Paul Dickinson, Environmental
  Research Group