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Sustainable Finance Community Update

Working towards a sustainable future

An IFoA Sustainability Board initiative. Follow us on LinkedIn and Twitter for further updates and insights, and subscribe to the newsletter here.
1st October 2021
What we are reading: Children born in 2020 will experience increased extreme events, particularly in low-income countries. Globally they will face 7 times more scorching heatwaves than those born 60 years earlier according to recent research published in Abuja, Nigeria by Muhammadtaha on Unsplash.
This week's updates at a glance:

From the editors...
In the spotlight...
In the news...
From the editors
Call for volunteers: Writing opportunity with the IFoA’s Actuaries Carbon Collaboration (ACC)
 The ACC is a team of professionals who combine their skills to educate and create thought leadership on carbon. They have developed some great ideas but lacks the resource to showcase them externally. 

Therefore, they are looking for volunteers who can get those ideas down in writing (or as graphics). You don’t have to be an expert, simply someone who wants to get involved in this exciting and timely topic with time available as well as an inclination to write. 

Apply here (IFoA).
IFoA Sustainability Board SDG survey

The IFoA Sustainability Board would like to hear from members about where their interests lie around the UN Sustainable Development Goals (SDGs). Please take a few minutes to answer a quick survey about how the SDGs relate to your actuarial work.

Complete the survey here (SurveyMonkey).
In the spotlight
Sustainability Board update - September 2021
The start of the new IFoA sessional year brings with it a new Chair of the Sustainability Board in Sandy Trust and deputy Chair, Lucy Saye. Sandy has already set out his Chair’s Themes, summarised as to “inspire and equip actuaries to incorporate sustainability into their advice". The objectives of the Board remain largely unaltered and there is consensus that now is the time for sustainability: interest has never been greater, and our priority is to translate that enthusiasm into demonstrable impact.
  • Diversity - Nick Spencer led the Board through its own effectiveness review. Overall, there has been increased representation from many different groups over the year, but there is a lack of representation from outside the UK.
  • Early Careers Board - Thrinayani Ramakrishnan briefed the Board on the work she had done towards establishing a productive platform for engagement between early career members of the actuarial profession and the Sustainability Board, recognising that early stage career members often have a great passion for sustainability.
  • Events - Darko Popovic outlined how sustainability weaves into all practice areas within the profession and how our events strategy reaches out to all members of the profession – the potential outreach is even greater following the IFoA’s recent commitment to free webinars for members.

Read the full update here (IFoA).
In the news
EU sets out to reform insurance and reinsurance sector

Europe’s insurance sector collects around €1tn in premiums every year and manages assets worth about €10tn   close to 3/4’s of EU’s GDP. Five years after the EU’s Solvency II regime entered into force, the European Commission has come forward with some key changes for insurers and reinsurers, addressing capital requirements and requiring more attention to climate change with the aim of enhancing investment in long-term, sustainable growth. 

In addition to measures to mitigate the effects of short-term equity market volatility, there is a new requirement for long-term climate change scenario analysis aiming to strengthen the sector’s management of climate risks. The Commission also wants to mandate EIOPA to review environmentally or socially harmful investments with a view to potentially reviewing the Solvency II standard formula. The legislative package will now be scrutinised by the European Parliament before eventual adoption. 

Read the article here (ICAEW).
From waste to resource: Can recycling CO2 help Saudi Arabia go green?
Crude Oil is not only a major source of energy, but its components parts are also put to a variety of uses, from pacemakers to toiletries, which makes it a valuable resource. Saudi Arabia holds the second largest crude oil reserves but despite this, they are now aiming to procure 50% of their energy needs from renewable energy and reduce its carbon footprint as part of its Vision 2030 Plan.

To reduce their carbon footprint further, they have also started to invest in carbon capture, utilisation and storage (CCUS) projects that turn CO2 into useful and saleable products. For example, creating energy efficient polyols – used in packaging and adhesives – for use in drinks manufacturing and for more efficient extraction of oil by pumping waste CO2 back into oil wells. 

CCUS could be used to help reduce the world’s carbon footprint – in anything from cement to fertiliser - but the technology is still in its infancy and would require further investment and research to help Saudi Arabia be a sustainable success. 

Read the article here (Independent).
'Critical': Mark Carney launches Net Zero Financial Services Providers Alliance

18 organisations from the financial services industry have formed the Net Zero Financial Services Providers Alliance, pledging to align all relevant products and services to achieve net zero greenhouse gas emissions by 2050 at the latest. COP26 President, Alok Sharma, said “mobilising the finance needed to accelerate the transition to net zero is crucial to save our planet from the worst effects of catastrophic climate change, and such commitment shows great climate leadership towards helping us to net zero”.

The group is the fifth major net zero alliance to have been launched in the financial sector over the last two years, following in the footsteps of the Net Zero Asset Owner Alliance in 2019, the Net Zero Asset Managers last December, the Net Zero Banking Alliance in April, and the Net Zero Insurance Alliance in July. The launch of this alliance also comes as dozens of financial institutions have called on governments to establish an ambitious Global Biodiversity Framework (GBF) to support global biodiversity goals.

Read the article here (Investment Week).
UK offers Covid quarantine waivers in push to hold UN climate summit in-person 

With under 40 days to go before the summit in Glasgow, the UK issued a last-minute quarantine waiver for ministers (plus two staff members) from “red list” countries attending the upcoming UN climate summit, bowing to complaints from scores of countries that they would otherwise be unable to participate. 

The UK’s sudden shift follows a formal protest from Latin American nations that believed that the isolation rule was discriminatory, would be a misuse of their ministers’ time and risks excluding the developing world’. The Latin American nations are significant players at the COP26 as, not least, they are home to the Amazon rainforest. Many other countries have also complained and more than 1,500 climate charities have asked for COP26 to be delayed.

While the UK took a first towards ensuring inclusion of ministers from all countries, other delegates from red-list countries will still have to quarantine, including technical negotiators and observers from non-governmental organisations. A COP26 spokesperson said “The participation of ministers from all nations in all parts of the world will be fundamental for achieving global agreement on climate outcomes,” he said.

Read the article here (FT - Paywall).
What we're reading
Intergenerational inequities in exposure to climate extremes
Children born in 2020 will experience increased extreme events, particularly in low-income countries according to a recent study that quantified lifetime exposure to climate extremes across generations. Globally, they will on average face 7 times more scorching heatwaves, 2.6 times more droughts and 2.8 times more floods than their grandparents.

The results highlight the strong benefits of aligning policies with the Paris Agreement for safeguarding the future of current young generations. Limiting global warming to 1.5°C, instead of following the “current pledges” scenario, nearly halves the additional exposure of newborns to extreme heat waves but still leaves younger generations with unprecedented extreme event exposure. The findings have implications for climate litigation and call for ambitious mitigation to improve intergenerational and international justice.

Read the report here (Science - Paywall).
Financing Africa’s urban opportunity   the why, what and how of financing Africa’s green cities
This report addresses financing Africa’s green urban transition; highlights urban opportunities; makes the economic case for sustainable urban infrastructure investment; and outlines financing solutions for low-carbon urban development applicable to the whole region.

Case studies from 3 African countries – Ethiopia, Kenya and South Africa – show how investment in compact, clean and connected, urban development could accelerate growth across the continent and secure more resilient and prosperous lives for their residents. Such investment is expected to contribute up to $1.1tn to their economies by 2050.

However, raising investment is a difficult task on the continent. The complex, diverse and unevenly developed landscape in which sub-Saharan cities operate makes for a challenging environment to attract and deploy urban investment. Therefore, addressing these challenges will take significant collaboration between national governments. As well as multi-national collaboration, there are financial instruments that have proven effective in pilots, such as a Breath Better Bond.

Read the report here (FSD Africa)
Tune in
Sustainability Series: Net Zero: Putting Interventions into Practice
Thursday 7 October 2021 11:15   12:45 BST

Closely following the IFoA’s first sustainability series webinar “What will COP26 mean for invetsmet?” (published in last week’s newsletter), there is a second edition which sees the IFoA’s president Louise Pryor host a panel discussion. The panel includes Dr. Emily Shuckburgh, Director of Cambridge Zero, Rebecca Willis, Professor in Practice at Lancaster Environment Centre, and Marian Elliot, Global Head of Pension at GFG Alliance.

This webinar will explore different levers that can be used to meet net-zero targets including climate science and data, government engagement, and mobilising green finance.

Register here (IFoA). 
Nature-Positive Insurance: How the insurance industry can help achieve the global goal of nature positive by 2030

Last July, net-zero insurance arrived with the establishment of the Net-Zero Insurance Alliance (NZIA) convened by UN Environment Programme’s Principles for Sustainable Insurance Initiative (PSI). This October, it’s the turn of nature-positive insurance. 
This pioneering webinar series explores how the insurance industry can help achieve the global goal of nature positive by 2030, convened by the PSI and the UN Convention on Biological Diversity (CBD). This series will set the global agenda for nature-positive insurance.
20 Oct 13:00 – 14:30 BST 
Insuring and investing in nature: Innovative solutions and new opportunities

21 Oct 13:00 – 14:30 BST: 
Key actions to advance nature-positive insurance including target setting in relation to SDGs and disclosure and emerging regulatory/supervisory thinking.

Register for the webinar series here (UNEPFI).
Gas crisis shows why we must stop demonising fossil fuels

The UK’s natural gas crisis has exposed the complex web of supply chains in today’s modern economy. Ammonia production, that feeds off natural gas, has been cut back leading to a hit to the supply of CO2 in the UK. And that has led to a cut in the supply of dry ice that supermarkets use to keep food cool in their delivery vans resulting in limited availability of ice cream. But there are more serious consequences of the natural gas crisis: hospitals might not have the carbon dioxide they need for minor surgeries and the nuclear industry is low on the gas they need for cooling.

According to Merryn Somerset Webb, editor-in-chief of MoneyWeek, this incident serves as a timely reminder of just how reliant we are on fossil fuels and how reliant we will be for decades to come. “Even after many years of efforts, coal, oil and gas still make up 80% of our global energy mix, pretty much exactly the same number as a decade ago.” This will change but not fast enough and “whether we like it or not our energy transition involves long term reliance on fossil fuels”. She believes we should stop demonising fossil fuels and instead “focus on making their extraction cleaner and more efficient while we wait for the engineering challenges around a renewables-led future to be solved”.

Read the piece here (FT - Paywall)
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Purpose of the Sustainable Finance Community

Communication is at the heart of shifting mindsets on climate and sustainability issues, and is vital in highlighting and understanding steps we can take as finance professionals to implement positive change.

The purpose of Sustainable Finance Community is to encourage members to read, share and discuss content, in order to help us with this aim. We want to encourage information to flow both ways, so please get in touch by replying to or follow us on LinkedIn and Twitter.

The weekly newsletter summarises information from different sources for the benefit of subscribers. While we take care to select articles, papers and opinions from reputable sources, we do not perform independent verification and hence these summaries should not be relied upon for any purpose. Further, the statements, opinions and conclusions that are summarised within the newsletter do not necessarily represent the views of the IFoA nor the newsletter authors and their employers.

This initiative is brought to you by the Institute and Faculty of Actuaries (IFoA) Sustainability Board (formerly Resource & Environment Board). The Sustainability Board is a group of voluntary actuaries working with the IFoA to encourage change within finance. We work alongside - but separately to - the IFoA and as such this is not an IFoA communication. Find out more about the IFoA Sustainability Board here.

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