The IFoA strongly supports the recommendations presented by the Task Force, which are designed to allow a greater understanding of the financial and strategic implications associated with climate-related risks and opportunities.
The IFoA’s submission stated that:
• Climate change poses serious risks to the global economy. Without effective disclosure, the financial impacts of climate change may not be correctly priced and this could have destabilising effects on markets.
• Asset owners and managers will be central in encouraging companies to adopt both qualitative and quantitative financial risk-relevant measures. However, there is a misconception of fiduciary duty for asset owners. There is also an over-preoccupation with the potential for a lack of political will to acknowledge climate change risk and the need for action.
• We recognise that only a minority of organisations will be able to engage initially with the TCFD’s recommendations to a significant degree. We therefore recommend the FSB establishes a standing committee to build on the TCFD’s valuable report by developing processes and mechanisms for engaging with governments, regulators, standard setting bodies, companies and asset owners to encourage implementation.
Colin Wilson, President of the IFoA, said: “The Institute and Faculty of Actuaries strongly supports the recommendations of the TCFD. Climate change poses serious risks to the global economy, and without effective disclosure the financial impacts of climate change may not be priced correctly. This could have destabilising effects on markets. We applaud the Task Force’s balanced and useful recommendations, and hope that organisations across the financial services industry and beyond will engage with them in the long term.”
“The IFoA is committed to highlighting the undeniable risks posed by climate change, and the effects that these will have on current and future generations”
The IFoA recently launched a series of Intergenerational Fairness Bulletins, the first of which is on the subject of climate change. It featured contributions from the Committee on Climate Change, Principles for Responsible Investment, Prudential Regulation Authority, University of Oxford, Global Sustainability Institute, Environment Agency Pension Fund, Bank of England and Share Action.
The Bulletin considers the role of discount rates, financial disclosure and the importance of understanding not just the likely possible outcomes, but the potential worst case scenario, when assessing the potential impact of climate change. The Bulletin focuses particularly on the role of long-term institutional investors, such as pension funds and life insurance companies.
The bulletin can be downloaded from the IFoA website.
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