Climate Change Blog – October 2019
This month, we are looking at the Australian Sustainable Finance Initiative (ASFI), the work that they are currently doing, and why it is relevant to actuaries.
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What is ASFI?
ASFI is a collaboration formed earlier this year in March. It is formed by leaders from across the Australian financial industry, including major banks, superannuation funds, insurance companies, financial sector peak bodies, and academia. Financial regulators, including APRA are observers on ASFI.
The full list of Steering Committee Members and Observers as well as more details on ASFI generally may be found at their site: https://www.sustainablefinance.org.au/
What is the purpose of the ASFI?
ASFI is seeking to align the financial system to support Australia’s commitments to human well-being, social equity and the environment. This would be seen in capital flowing away from negatively impactful assets towards assets supporting a more sustainable economy.
The scope of the ASFI is to develop a Sustainable Finance Roadmap, recommending pathways, policies and frameworks to meet its objectives:
- Mobilising capital to meet Australian national and global sustainable development goals, based on science-based targets and international standards,
- Embed sustainability and human rights considerations in financial markets to better account for and manage risk,
- Enhanced disclosures and transparency in financial markets in relation to environmental and social risks and opportunities, and
- A financial system that meets community and consumer expectations around sustainability.
Why is it relevant to actuaries?
ASFI follows similar work that has been done by the European Commission and the UK.
These are expected to have wide ranging impact on the financial system. The EU Taxonomy project is seeking to define which economic activities can be called sustainable, and which cannot, thereby regulating the description of different financial products as sustainable or not. Further, EIOPA have made recommendations on updating the Solvency II regulations to include sustainability. This clearly has implications for European actuaries.
We have yet to see what recommendations ASFI will make for Australia, and what the response may be from financial regulators and Australian policy makers. If ASFI adopts a similar approach to the Europeans, there could be significant implications for actuaries working in insurance and superannuation.
More broadly, there are significant capital flows between the Australian and European financial systems. If Europe is seeking to drive capital and investment towards sustainable activities, then this may have an adverse impact on Australia if our financial system is seen to be less sustainable.
Joint Statistical Meetings (JSM)
Here’s another acronym for you to learn – JSM.
(No, this is not a hint to the crossword puzzle)
On 29 July the American Academy of Actuaries organized a panel sponsored by the Casualty Actuarial Society at the Joint Statistical Meetings (JSM) in Denver, Colorado, on Assessing Climate Risks. The JSM is one of the largest gatherings globally of statisticians, data scientists, and other quantitatively inclined people.
Rade Musulin, who serves on the Institute’s Climate Change Working Group, represented the Actuaries Institute. He presented on the Australian Actuaries Climate Index and discussed plans for an Australian Actuaries Climate Risk Index. He also discussed the activities of some of the other actuarial associations in the world relating to climate risk.
Steve Jackson, the American Academy’s Assistant Director for Research, chaired the panel and led off by presenting the Actuaries Climate Index and the proposed Actuaries Climate Risk Index.
Joining them to discuss possibilities for the future were Steve Kolk, a member of the American Academy’s Extreme Events and Property Lines Committee; Peter Sousounis, Director of Climate Change Modeling at AIR Worldwide; and Michael Wehner, Senior Staff Scientist at the Lawrence Berkeley Laboratory and a lead author of the IPCC Climate Assessments as well as the US National Climate Assessments.
A description of the session and slides from the presentations may be found here. Rade’s material is included with Steve Jackson’s slide deck in two places in the link to Presentation 1.
Solution to crossword puzzle
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Would you like to know more?
Other climate change articles published by members of the Climate Change Working Group:
- Climate Change Blog – May 2019 by James Yap & Evelyn Yong
- Climate Change Blog – March 2019 by James Yap
- Climate Change Blog – February 2019 by David Hudson & Evelyn Yong
- Insight Session: Peril, Pricing and Climate Change – Richard Carter
- Climate Change Blog – November 2018 by Evelyn Yong
- Climate Change Blog – October 2018 by Evelyn Yong
- Climate Change Blog – September 2018 by David Hudson
- Climate Change Blog – August 2018 by David Hudson
- Climate Change Blog – July 2018 by Evelyn Yong
- Climate Change Disclosure – Financial Institutions Feel the Heat by Sharanjit Paddam and Stephanie Wong
- Climate Related Financial Disclosures: The Way Forward? by Wayne Kenafacke.
- An Overview of the Actuaries Climate Index by David Hudson
- Climate Risk Management for Financial Institutions by Sharanjit Paddam, Stephanie Wong and Alison Drill
- TCFD Webinar: Climate Leadership – How to Support the TCFD
CPD: Actuaries Institute Members can claim two CPD points for every hour of reading articles on Actuaries Digital.