Those most at risk from the impacts of climate change often have the least influence over its causes. This stark reality was the central point of discussion in our Road to Glasgow webinar, Climate Justice and Future Generations.
In debates around COP26 there has been a growing focus on climate justice – the concept that approaches anthropogenic climate change as an ethical, legal and political issue, rather than one that is strictly environmental or meteorological in nature.
There are many climate-related policy issues where a long-term view is essential if the needs of today’s societies will be met without adding to the challenges younger and future generations will have to deal with, according to speakers at the IFoA’s fourth COP26 thought leadership webinar series on sustainability, The Road to Glasgow.
Panellist Alice Bordini-Staden, of research and education charity Intergenerational Foundation, opened the discussion by naming climate change as a quintessential example of intergenerational unfairness. Its urgency should not be shifted out of context by other global crises, such as the Coronavirus pandemic.
“The pandemic has been tragic, but it has not been an existential threat to the entire human race,” Bordini-Staden said. “Climate change, however, potentially is.”
“There are certainly many excellent initiatives aimed at mitigating climate change that agencies in the private sector are working on and involved in,” added Bordini-Staden, “but the real difference will be made by strong and co-ordinated policy response.”
Panellist Jane Davidson, Pro Vice-Chancellor Emeritus at the University of Wales Trinity Saint David, cited Wales’s The Well-being of Future Generations Act (2015) as an example of where progress has been made in regard to policy response – in particular, the Act’s ‘sustainable development principle’.
The Act requires public bodies in Wales to think about the long-term impacts of their decisions, to work better with people, communities and each other, and to prevent persistent problems such as poverty, health inequalities and climate change, Davidson explained.
“The Act has made Wales the first country in the world to implement a legal mechanism for the sustainable development goals,” said Davidson, “and it’s not just about the goals as contained in there – the ways to deliver on those goals are also articulated in this charter.”
Discussion turned to the provision of finance for climate justice causes, and the $100 billion per-year needed to help developing nations to cut their carbon emissions (see IFoA Blog Post ‘Five takeaways from COP26 Finance Day’).
“There’s no doubt that the biggest chunk of the $100 billion will be private capital, and there are lots of institutional investors, such as pension funds, that have this amount of money – and they have to find a place to deploy it,” said Bordini-Staden, “but we need very strong actions from the policymakers to make it possible to start this virtuous feedback loop. We need policy that confirms tangible, credible and equitable fiscal frameworks that remove uncertainty and gives confidence to private capital – fiscal frameworks which de-risk private investments.”
By doing so and supporting investments in technology it will give the confidence to private capital to flow in, Bordini-Staden predicted: “It will allow for proof-of-concept solutions and economies of scale, much as happened with research and development in solar and wind energy. By doing more and more it would provide the economic impetus to progress innovations. Then, once the economic drivers are in place and the capitalist system is working, we’ll gain the buy-in from wider society.”
Panellist Kudzai Chigiji FIA, FASSA, Founder at AfricansThinking, said that in the context of funding, there’s an opportunity for actuaries to review their sphere of influence and see what difference they could make through their professional actions.
“Actuaries are considered trusted advisors across asset management around the world, and as has been mentioned, one of the greatest pools of capital is within pension funds and reinsurance insurance organizations,” Chigiji said. “So if we, as actuaries, sit in the middle of all of this capital that can be used for good, what is stopping us from playing a part? Are we really taking responsibility for how this capital is used? Are we really challenging ourselves as a profession to do what is right – not just by ourselves, but by future generations?”
Chigiji continued: “It’s time for actuaries to put some action behind all of our words and our intellectual prowess – it is time for us perhaps to be one of the key voices to make financial sense of a world where climate change is now a reality.”
Davidson agreed. “This is about investment, this is about decision-making, and how can we get to a situation where the risks are transferred away from the climate, so that climate itself is not perceived to be a risk in any of these decisions, “ she said. “It’s a question of saying, ‘well, how do you create a level playing field so that investors don’t need to step up ahead?’ A playing field where climate now becomes the same kind of risk as mortality and morbidity both for actuaries and for public and private investment houses.”
For Chigiji also, it was important that private capital “steps up”. “It’s not just about reconfiguring the financial system pieces that we know within the parameters as they currently exist,” she said. “We actually need to move the parameters themselves, and speak up when there’s evidence that legacy financial products don’t work – and we quickly need to re-imagine alternative products that are very different.”
Chigiji added: “As actuaries we spend years stretching our minds and trying to figure-out how we can influence the flow of capital, the transfer of risk, and manage it better. This being so, I do not believe that this is an insurmountable challenge. I think that we actually have not yet applied our actuarial minds quite well enough.”
In May 2021 the International Energy Agency (IEA) published a report that outlines its scenario for the global energy system to reach Net Zero annual emissions of CO2 by 2050. It sets out more than 400 regulatory changes to guide the global transition to Net Zero by 2050. They include, starting from 2021, no investment in new fossil fuel supply projects, and by 2035, no sales of new internal combustion engine cars.
Bordini-Staden expressed her faith in the power of new regulation to lever change in established industries with a track record of planet-unfriendliness.
“As regulation changes – and I am confident it will change – and as investor action escalates, companies in the oil sector, for example, will not be able to continue doing what they are doing,” Bordini-Staden said. “The amount of fossil fuel reserves that oil companies have on their books now will largely have to stay in the ground – so we’re talking about the concept of ‘stranded assets’, and investors face potentially steep losses if they stay invested in assets that are overvalued.”
The discussion moved on to the question of how well information about climate change and climate justice is made available to people, and the extent to which it can cause people to change their lifestyle choices in favour of low-carbon alternatives.
For Chigiji, bringing about behavioural change should start with the very young: “If you can, in a time of pandemic, teach a five year-old the impact of not wearing their face mask or washing their hands properly, then you can also teach them about climate change”.
She added: “I refuse to believe that we’re doing ourselves justice if we’re limiting the amount of information about low-carbon lifestyles that’s out there. Consider that six months into the pandemic we had guidance pamphlets delivered to most of the population, and there was signage everywhere reminding us about the importance of washing our hands and wearing a face covering. And statistics were freely available. We have not enacted the same public education programme for climate change.”
However, for Bordini-Staden, education-led behaviour change is not enough. “We haven’t got enough time to allow for everyone to start shifting behaviour,” she said. “Also, let’s not forget that there will be a certain section of the world’s populations that just cannot afford to change to a low-carbon lifestyle, and that will be, of necessity, drawn to the cheapest alternative. For instance, in a lot of places coal is still cheap. Even if you provide people with the option to buy renewable energy, if it’s more expensive than fossil fuels, people are just not going to go for it.”
Chigiji concluded the webinar discussion with a return to the topic of the role of actuaries in changing the nature of financial evaluation. She highlighted another component of actuarial expertise where actuarial professionals could apply their core skills to influence eco-favourable outcomes.
“Actuaries can drive a discussion that says, actually, investing in climate-friendly technology is a financially sound and prudent decision to make,” Chigiji explained. “That’s because that investment will outlast anything that we currently do, in terms of risk and returns. Actuaries can break this argument down into numbers and logical arguments that investors, asset managers, and capital allocators can understand and rally behind.”
