On 4 May, the IFoA published the outcome of their consultation in relation to proposals for changes to the regulatory framework on climate change and sustainability. The Institute reports that the responses to the consultation indicate that there is a clear demand for more learning opportunities and education for actuaries, as well as practical guidance and advice on incorporating these issues while wider industry and understanding and approaches continue to develop.

As a result of the consultation, the Institute has issued a Risk Alert which describes that there is a risk that actuaries may not appropriately consider or communicate clearly, the impact of climate change and sustainability-related issues in their actuarial work (Risk Alert, 21 April 2022: Climate change and sustainability related issues). Risk Alerts are a series of emails by the Institute’s Regulatory Board drawing members’ (and others’) attention to specific issues but are not mandatory guidance. Further, the Institute has confirmed that it will not introduce any additional mandatory regulatory requirements at this stage.

Neil Buckley, chair of the Regulatory Board said “By issuing this new Risk Alert, we are emphasising to members a risk that actuaries need to evaluate as to whether they are considering appropriately, or communicating clearly, the impact of climate change and sustainability. The Risk Alert is part of a series of commitments by the Regulatory Board as a result of the recent consultation and seeks to emphasise to members how the current regulatory requirements, such as the Actuaries’ Code, apply in this area.”

The Risk Alert states that “climate change and sustainability represents a variety of risks, including material financial risks for financial institutions which are advised by actuaries and could impact the public interest. The understanding around the implications of climate change and sustainability considerations on financial systems have developed significantly and is an evolving area of expertise.”

We have no doubt that climate change and sustainability, as well as social and governance factors (forming the wider topic of “ESG”) will continue to be a prominent issue for all pension professionals, as well as interested parties such as employers and trustees. As the Pensions Regulator has acknowledged, the pensions landscape, the needs of savers and the wider regulatory framework are evolving rapidly in relation to climate change. Keeping abreast of changes in relation to this area will be key. Employers or trustees may like to consider talking to their actuarial advisers about how they are considering ESG issues in their actuarial work. 

Please let us know if you would like further information or advice in relation to ESG issues for pension schemes or providers.