Dhruv Gavde of the Sustainable Finance Community (SFC) interviewed Timothy Cheng, steering member of SOA Climate and Catastrophe Research Committee, to talk about his career and sustainability
I started in traditional actuarial areas focusing on employee benefits. Since 2019, I have pivoted my career more heavily towards sustainability, working in sustainability consulting and climate-related roles in both boutique and large organisations.
I am incredibly passionate about sustainability and I am forever seeking new ways to merge my actuarial skillset and sustainability background. I learn new things every day meeting new clients working on the latest environmental, social, and governance (ESG) developments and policies. Sustainability is a fast-evolving area with a lot of exciting opportunities coming up.
In secondary school I was involved in a lot of volunteering because I liked to solve problems in society. Sustainability issues span wider than climate or inclusion, giving a lot of breadth and variety. There are many challenges in society that business and government cannot solve, so they remain in the community. During my volunteering experiences, I admired people who were not afraid to be creative and touch on issues that may not have strong funding or financial regulation, helping disadvantaged groups in society.
It started in my university years. My degree at the Chinese University of Hong Kong covered, beyond traditionally actuarial subjects, financial analysis, marketing, management, and business. My involvement in internships and volunteering gave me exposure to various sustainability issues. My first internship with Rehabilitation Alliance Hong Kong was centred around disability and inclusion. To address my knowledge gaps in the area, I also took online learning courses.
The most effective and interesting way for me to upskill has been to learn by doing like working as a consultant for GlobeScan. There I learnt a lot from my clients, who were predominantly NGOs or corporates. Some of them are sustainability leaders with a lot of experience in the field. Consulting in this way enabled me to learn continually.
I believe it is a unique role we find ourselves in as actuaries in the sustainability space. Sometimes people may not immediately understand my role within a project as an actuary. Articulating how actuaries can bring their skills to this domain is the greatest challenge in my career. For example, explaining how to address a problem, how to prove myself, and how to bring value with my actuarial skillset.
Definitely climate. Actuaries love data, and climate is particularly well suited for measurement: quantifying carbon emissions, energy use, weather change, and extreme weather events. These are related to probability, statistics, and data which actuaries are well-familiarised with. There is also much cohesion in these areas, since we can all refer to the Paris agreement, COPs, IPCC reports, and the target of limiting temperature rises to 1.5C above pre-industrial levels.
The gap between what scientists say is necessary to meet net zero and reality is huge. Green finance is everywhere: there are commitments for assets, for example via the Glasgow Financial Alliance for Net Zero with targets for 2050 through investing in low and no carbon technologies and phasing out coal and fossil fuels. Despite these alliances, commitments, and new green financial products, the most recent IPCC report states there is currently a 1.1C increase in temperature above pre-industrial levels. This is fast approaching the Paris agreement target of limiting warming to 1.5C. In fact, IPCC projections tell us we are headed towards a 3.2C increase by 2050. The IPCC has also indicated that sustainability investments need to be 6 times higher than their current level to align with this science-based target of 1.5C.
The gap is significant, and we need to do more in the sustainability industry. Within insurance specifically, we can also play a part by committing to net zero. Some insurers hold a unique position, for example general insurers who price in their clients’ assets’ carbon footprint and exit high-emission industries like coal. In underwriting, a lack of climate risk management could be grounds for refusal of cover.
The insurance industry still has a lot of opportunities: especially in making innovative insurance policies that are more attractive and comprehensive. Individuals may think of insurance costs when making choices such as switching to an electric car. This can be used to encourage greater uptake of electric vehicles and drive down carbon emissions.
It is important for employers to know the role that actuaries can play. When we talk about transition plans for net zero, this not only involves people from a scientific research background. It also includes other skillsets such as those of actuaries and data scientists.
Actuaries can contribute to this work through leveraging the data skills, for example by:
With climate risk-based pricing and cost consideration, the company can visualise climate impact and make informed decisions to advance the progress of net zero and ESG goals.
Actuarial societies and clubs can also play a role. We have been sharing the latest climate research from the SOA in conferences and events hosted by other actuarial clubs. Having a voice in the industry can help significantly, especially in a forum where you also invite non-actuarial members. Banking and financial services industry representatives can then learn what actuaries are doing through these public events and leverage our skills too.
This blog reflects Timothy Cheng’s views and not those of his previous and current employers, SOA, and the IFoA.
