The Institute and Faculty of Actuaries (IFoA) is urging the financial sector to be ready for the “changes coming our way” because of the economic and financial risks posed by biodiversity loss.
Nick Spencer, former chair of the IFoA’s sustainability board, said companies and financial institutions will be required to monitor, assess and disclose the impact of their operations, supply chains and portfolios on biodiversity.
The Taskforce for Nature-related Financial Disclosure (TNFD) is expected to publish its risk management and disclosure framework in September.
The Financial Conduct Authority said it will consult in the third quarter of this year on proposals to make TNFD reporting mandatory, Spencer added.
He continued: “In the longer term, if the requirement to disclose fails to change business practices sufficiently, we believe further regulation or other direct action may be needed.”
As part of its response to biodiversity loss, IFoA has published a policy statement, recognising the social, economic and financial risks posed by diversity loss.
The policy states that the disappearance or decline of the variety of living things on the planet is global and systemic.
It adds that biodiversity loss threatens health and ecosystems and has significant implications for the health and longevity of the global population.
IFoA said that its new policy points to the important role the actuarial profession has to play in helping to quantify the risks associated with biodiversity loss.
The policy statement commits the IFoA to:
- advocating for the development of effective policy frameworks worldwide and methods for managing biodiversity risk in the financial services sector;
- using the actuarial skill set and influence to help equip the wider global financial services markets to fully incorporate biodiversity risk;
- supporting actuaries in their understanding of biodiversity risk through education resources and thought-leadership content including webinars and blogs;
- advocating for better disclosure of consistent and robust information about biodiversity risk across the financial services sector;
- supporting collaborations between IFoA members and other organisations to help develop and align financial systems with a just, sustainable economy that manages biodiversity risk.
Spencer said: “There is global recognition that we need to act now to reduce our biodiversity and nature loss in order to avoid irreversible consequences. The actuarial profession is well placed to help businesses and other organisations understand, assess and help mitigate risk.”
Earlier this month, IFoA published a report that found that economic models underpinning climate scenario modelling in financial services do not always reflect the threat climate change poses to the planet and society.
Spencer added: “We have been highlighting the importance of these risks for some time through the work of the IFoA’s Sustainability Board and the Biodiversity Working Party.
“Today’s policy statement lays out our commitment to support biodiversity and we will be accelerating our work in this area because time is not on our side,” he concluded.