Nature at risk, models at fault: Why biodiversity can't wait

Three intersecting realities

There are three intersecting realities that lead to this fundamental conclusion, with the corollary of three intersecting challenges that actuaries and the profession need to engage with, if we are to fulfil our core functions of adequately assessing pricing, reserving, and risk resilience for insurers and pension funds. 

The three realities are: 

1. the impact of biodiversity risks to the UK economy and financial institutions are equal or greater than climate risks
2. climate and biodiversity are intrinsically linked and mutually reinforcing, and
3. the outcome of climate and biodiversity pathways are fundamental to understanding the potential state of our future economy and macro-economic impacts to financial institutions. 

The three challenges to actuaries and the profession are:

1. biodiversity scenario modelling faces data, technical and conceptual challenges
2. actuaries will need to upskill in system thinking, complex risk modelling and narrative scenario development
3. actuaries need to challenge regulators, existing practices and vested interests on the necessity of changing current climate scenario approaches so that these include biodiversity.

To fail to address these will be to fail to undertake the core actuarial functions and obligations expected of the profession. 

Challenging, complex, and necessary

In brief, integrating Biodiversity into our Climate scenarios is Challenging, Complex, and Necessary. However, the report shows that such integration is possible and highlights the key areas for improvement and further development.

The report also outlines the broader findings from the workshop and working party investigations. In summary, these are:

1. Biodiversity is critical for climate risk analysis: Biodiversity underpins ecosystem services essential to economic stability, health, food production, and climate regulation. Biodiversity loss poses systemic, long-term risks to society and the financial system.
   
   There is a material risk of biodiversity and nature-related macroeconomic impacts equalling the 2008 Global Financial Crisis, or even the COVID-19 pandemic, within the next 10 years. Biodiversity risk is both interrelated with, and of an equivalent size to, climate risk. Thus, meaningful future scenarios need to incorporate the analysis of both climate and biodiversity pathways.
   
   
2. Current climate scenarios have major gaps: Widely-used climate scenarios (such as NGFS and IEA) rarely integrate detailed biodiversity impacts, creating significant blind spots for risk assessment, policy, and financial decision-making. Examples of assessment gaps in climate-only scenarios include food system impacts, land use tensions, ecosystem service collapse, pandemics and forced migration. Failure to incorporate biodiversity leads to misleading outputs and underestimation of both chronic and acute risks.
   
   
3. Climate and biodiversity risks are deeply interlinked and mutually reinforcing: Climate change accelerates biodiversity loss and vice versa. Biodiversity loss weakens natural climate regulation systems and lowers our resilience to severe weather and climate shocks. Biodiversity loss has the potential to turn natural greenhouse gas (GHG) sinks into sources of GHG emissions. These risks amplify each other through feedback loops, compounding threats to economies, societies, and financial markets that exceed individual risk assessments.
   
   
4. Biodiversity scenario modelling faces technical and conceptual challenges: Biodiversity risks and aligning to biodiversity objectives is made more difficult to model due to the absence of simple, universally accepted metrics. Existing models lack consensus on measurement, face severe data gaps, and struggle to capture non-linear, cascading, and tipping-point events.
   
   However, there are existing examples that have overcome these challenges using norms-based approaches (with alignment to Kunming-Montreal goals) and narrative-based approaches focused on extreme-but-plausible scenarios.
   
   
5. Narrative approaches are essential: Quantitative models alone are insufficient as they are unable to encompass outcomes that arise from factors outside of their data set and construction philosophy. Qualitative narratives are needed to communicate complexity, uncertainty, and the full range of plausible futures. 
   
   Decision-makers, regulators and standard setters must become more comfortable with narrative-based scenarios to avoid “false precision” and better prepare for systemic risks.
   
   
6. Requirements of actuaries and the actuarial profession: Actuaries must systematically integrate biodiversity into all their climate scenario analysis to provide a more accurate, actionable foundation for risk management and policy. To support this, the Profession must: 
   
   a. Embrace systems-thinking and narrative approaches, supporting continual scenario development to keep pace with evolving risks.
   
   b. Support upskilling of actuaries in systems thinking, complex risk analysis and narrative approaches: enabling actuaries to move beyond purely quantitative models, embedding this in the qualification syllabi and CPD expectations of certificated actuaries.
   
   c. Support policy advocacy and regulatory reform: requiring the integration of biodiversity risk considerations into regulatory and disclosure frameworks, highlighting where commonly-used scenarios are not fit for purpose.
   
   d. Public-interest communication of limitations: engage in broader public-interest communication, to be transparent about gaps in current climate scenario approaches and especially the absence of detailed biodiversity elements. Also, to highlight the potential role of, and insights offered by, narrative scenarios and ensure the limitations and uncertainties of approaches are understood, especially the limitations of using quantitative models, which may appear more precise. 
   
   e. Advocate for the development of better data and metrics to improve quantification of biodiversity risks, along with developing a better understanding of the macro-economic impacts. A better understanding of nature-specific metrics and topical understanding should be brought inside core Actuarial syllabi alongside equivalent skills for climate and sustainability.
   
   
7. Challenging, Complex, Necessary: Biodiversity’s inconvenient truth is that integrating biodiversity-related risks into climate scenario analysis is challenging and complex, but absolutely necessary.
   
   Existing examples show that these challenges can be overcome. The necessary next steps are to ensure this becomes universal practice, embedded into supervisory expectations alongside the upskilling of actuaries to enable them to develop narrative scenarios for complex, interconnected risks. 

_References

<sub>1. Biodiversity is defined as the variability among living organisms from all sources, while nature is broader and includes all features, forces and processes created at the same time as Earth, such as water, geology and climate. Within their report, the scenario impact of both biodiversity and the broader element of nature are included together. For ease of reading, the report predominantly uses ‘biodiversity’ as a proxy for ‘biodiversity and nature-related’ risks and impacts.

2. See also IFoA Biodiversity Working Party, 2025. Climate scenarios "not fit for purpose" without biodiversity. [online] Available at: https://blog.actuaries.org.uk/climate-scenarios-not-fit-for-purpose-without-biodiversity/  [Accessed 28 July 2025].</sub>

About the working party

The IFoA Biodiversity Working Party Scenarios group consisted of Mary Goldman, Mike Sher, Nick Spencer and Esin Yilmaz working in their individual, professional capacity.