Institute and Faculty of Actuaries, News:
17 June 2025
The Institute and Faculty of Actuaries has provided a summary of recent climate-related risk research which has been included in reports sent to global finance ministers. These reports were provided ahead of the International Monetary Fund (IMF) and World Bank Group (WBG) 2025 Spring Meetings in late April.
IFoA Fellows and sustainability risk actuaries Sandy Trust and Georgi Bedenham sit on the Technical Advisory Group set up to advise the Coalition of Finance Ministers for Climate Action. This coalition is supported by the IMF and WBG and brings together fiscal and economic policymakers from 97 countries.
The series of IFoA research reports started in 2022 with ‘Climate Emergency – tipping the odds in our favour: A climate change policy briefing for COP27’. In 2023, we released ‘Emperor’s New Climate Scenarios – a warning for financial services’. This was followed in 2024 with ‘ClimateScorpion – the sting is in the tail’. Although coming too late for the IMF/WBG spring meeting briefings to finance ministers, the latest in the series was released in January 2025 entitled ‘Planetary Solvency – finding our balance with nature’.
Sandy Trust, IFoA Council member and IFoA Climate Risk series lead author, said:
“There is an urgent need for finance ministries to include realistic and current climate assessments risk into their economic analysis and modelling approaches. Global warming has accelerated, and the 12-month average temperature is now above the 1.5°C goal. This is driving increasingly severe impacts – fires, floods, heat, and droughts – which are coming sooner than expected, are worse than expected and outside model projections. Climate change is fast becoming a national security issue with food, water and heat stresses impacting populations.
“Finance ministries have to support important government decisions on prioritisation of climate change action. We urge ministers to adopt a set of principles to develop realistic economic assessments of climate impacts and opportunities. Our contribution to the reports provided ahead of the IMF and World Bank meetings are designed to draw attention to the limitations of first generation climate risk models which understate risks and provide some very specific recommendations to better assess the economic impact of climate change.”
Kartina Tahir Thomson, IFoA President, said:
“Climate change is a risk management issue on a global scale. If we want to avoid severe disruption to the economy and our global society, we need to take action to reduce emissions, limit warming, mitigate the extent of future climate risks and adapt to those we cannot avoid.
“It is great to see this IFoA research being delivered direct to policymakers in over 90 countries. Given their skills and expertise in assessing long-term risk, actuaries are well placed to help draw attention to these climate risk challenges and to offer solutions.”
The report was included in the Coalition of Finance Ministers’ for Climate Action’s Helsinki Principle 4 initiative ‘Economic Analysis for Green and Resilient Transitions’. The IFoA’s contribution was part of its newly published Compendium of Practice.
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Excerpt from The urgent need for Ministries of Finance to factor systemic climate risk into their economic analysis and modeling approaches and principles for doing so: a view from the insurance and pensions industry, June 2025:
Key findings—realistic economic analysis to support Ministry of Finance decisions
1. Ministries of Finance have to support important government decisions on the prioritization of climate change, e.g., how much effort to expend on countering it, relative to the effort that must be spent on other issues. They use integrated assessment models (IAMs) to assess economic implications of climate change risks and opportunities, including policy decisions on incentives to accelerate the transition and how to build resilience into societies to withstand anticipated climate impacts.
2. However, IAMs have significant limitations, meaning they can understate both the climate risks and the economic opportunities arising from the energy transition. Basing policy decisions on these models may lead to inadequate adaptation, loss of resilience, and missed economic opportunities.
3. To address these limitations, MoFs should adopt a set of principles to develop realistic economic assessments of climate impacts and opportunities, including adopting a precautionary-principle approach, developing risk management capacity, and providing decision-makers with better information.
4. MoFs should lead the development of National Transition Plans (NTPs)—strategic pan economy plans that direct private sector action around financing, incentivizing, coordinating, and enabling the transition. NTPs should include requirements for realistic risk assessment to support policy decisions to accelerate mitigation and build resilient infrastructure.
5. The backdrop to this analysis is that global warming has accelerated, and the 12-month average temperature is now above the 1.5°C goal. Record high temperatures are occurring continuously across the globe, with multiple locations now experiencing 40°C–50°C peaks. Polar regions are experiencing temperatures 30°C–40°C higher than normal. This trend will likely continue as emissions are ongoing and other factors, such as forest fires, ice loss, and loss of aerosol cooling, are driving warming.
6. This trend is having increasingly severe impacts—fires, floods, heat, and droughts. Climate change is becoming a national security issue, with food, water, and heat stresses impacting populations. If it goes unchecked, then mass mortality, involuntary mass migration events and/or severe GDP contraction are likely.
7. But warming above 1.5°C is extremely risky, with a high chance of triggering multiple climate tipping points, such as the collapse of ice sheets, permafrost melt, Amazon dieback, and halting major ocean current circulation. Impacts could be catastrophic, including significant loss of capacity to grow major staple crops, multi-meter sea-level rise, and further acceleration of climate change through the release of greenhouse gases.
In 2022 in its first term the Albanese Labor Government joined the Coalition of Finance Ministers for Climate Action (created in 2018-19), as of May 2025 this coalition comprises of 98 members supported by 21 Institutional Partners and 9 Knowledge Partners.
NOTE: The United States of America, Russia, Israel & North Korea are notable absences from the membership list to date.
Additionally in 2022 the Australian Treasury joined the International Platform on Sustainable Finance (launched in 2019).