The global economy could face a 50% reduction in gross domestic product (GDP) between 2070 and 2090 unless action is taken to address risks associated with climate change, according to a report by the Institute and Faculty of Actuaries (IFoA).
The report, entitled “Planetary Solvency – Finding Our Balance with Nature”, highlights that current climate targets allow for significant and largely unrecognized risks to nature and society. This includes the potential crossing of climate tipping points, which could result in irreversible changes and reduce the ability to mitigate climate impacts. It asserts that no feasible plan is currently in place to avoid these outcomes.
“Nature is our foundation, providing food, water and air, as well as the raw materials and energy that power our economy,” said Sandy Trust, the report’s lead author and IFoA council member. “Threats to the stability of this foundation are risks to future human prosperity which we must take action to avoid.”
The risks, driven by human activity, require immediate action to protect societal stability, the report said. Populations are already experiencing food system disruptions, water scarcity, heat stress and infectious diseases. The report warns that, if unaddressed, these issues could lead to mass mortality, displacement, economic decline and conflict.
The report, which was developed in partnership with the University of Exeter, proposes a framework for global risk management, aiming to guide policymakers in addressing planetary risks and ensuring future prosperity.
A key element of the framework is the introduction of a “Planetary Solvency risk dashboard,” designed to provide actionable risk information for decision-makers and to promote sustainable human activity within planetary limits.
“Widely used but deeply flawed assessments of the economic impact of climate change show a negligible impact on GDP, rendering policymakers blind to the immense risk current policy trajectories place us in,” Trust stated.
Tim Lenton, a professor at the University of Exeter, added that current approaches are failing to properly assess and control the risks.
“This new report shows that, now more than ever, we need to continue working with policyholders, governments, scientists and other stakeholders, to come up with a solution that will address this emergency,” concluded Kartina Tahir Thomson, president of IFoA.
The IFoA is the professional body which represents and regulates actuaries in the UK. It operates under a royal charter and its members take on advisory roles in areas such as pension fund management, insurance and risk assessment for business planning and public interest work.
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