Climate Risk and sustainability at SDA

The IFoA launched its Climate Risk and sustainability certificate in March 2022. The course provides an understanding of the main concepts of climate risk and sustainability that are relevant to actuaries, how those concepts are relevant and what impact they might have on actuaries’ work, and how to apply these concepts in their work.

The course is broken down into nine modules:

  1. Evidence of Man-made Climate Change and its Physical and Transitional Impacts
  2. UN, NGOs, Other stakeholders and Sustainability
  3. TCFD and Financial Regulation
  4. Economics & Sustainability
  5. Intergenerational Issues
  6. Strategy and Risk Management
  7. Climate Models/Modelling
  8. Reporting and Communication
  9. Closing Seminar

Ricardo Melo completed the course in December 2023 and this has led to him making related suggestions for enhancements to our existing strategy, risk management, reporting and communication to clients.

Climate change is a very large and evolving field. There is increased demand from regulators for more extensive disclosure of insurers’ own assessments of the risks they face and an expectation of inclusion in ORSA for insurance.

The course is relevant to actuaries, because it supports us to communicate uncertainties of climate change future outcomes, adapt new risk measurement tools to incorporate climate-related risks, be able to develop realistic scenarios, understand tail risk, and adjust underwriting strategies to reflect climate risk.

Climate risk and sustainability are relevant to SDA, because they impact how we manage uncertainty over long-term horizons. We have enhanced risk management practices to ensure that climate-related risk is properly considered and assessed in our enterprise risk management framework. Furthermore, we are in a good position to support clients in their assessment of climate-related risks and production of climate-related disclosures.

Whilst the course does not give a blueprint for climate- and sustainability-related processes, the key considerations in developing and implementing a climate change and risk management strategy it set out are particularly useful. It will enable us to improve scenario analysis techniques by forward-looking views of clients’ risk exposures and how this links to their future business strategy.

We will be encouraging others at SDA to enrol in future courses, to enable them to expand their knowledge outside of current core actuarial practice areas. This will allow us to identify opportunities to integrate climate change models and data into actuarial modelling, implement climate change risk strategy, and produce climate-related disclosures across our business and enhance the services we offer to our clients.