Environment Sustainability features@theactuary.com
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Can actuaries make a valuable contribution to sustainability projects? Louise Pryor and Tracey Zalk talk to four actuaries who are trying to make sustainable sense of the future Nuclear clean-up, carbon capture and electricity generation aren’t necessarily the first fields that would come to mind if you were asked what actuaries do, but at a networking event organised last autumn by the Resource and Environment member interest group, we discovered that actuaries are working in all of them. We wondered how and why traditional pensions and insurance actuaries get involved in sustainability, and spoke to four of them to find out. David Comerford, now studying for a PhD in economics, originally qualified as an actuary in 2006 and worked in the insurance sector. He believes that the primary challenge in the sustainability field is creating a policy framework capable of giving consumers and investors incentives that address the problems caused by resource constraints and environmental issues. He thinks that groups of individuals, companies and professional bodies, like the Institute and Faculty of Actuaries, have a role in arguing for this policy framework to be put in place. This is a sentiment with which Claire Jones wholeheartedly agrees. Jones originally worked in pensions for Lane Clark & Peacock, and is now sustainability and economics manager at the Institute of Chartered Accountants in England and Wales (ICAEW). She has been active in the sustainability field for about 10 years, recognising both its importance for the work that accountants do and the influence that accountants have on social and environmental outcomes. Sustainability issues are too often seen as concerns for other people, she suggests. Part of the problem is caused by gaps in background knowledge. For example, business and finance specialists may know little about ecology, so they often do not appreciate just how much
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businesses and society generally depend on the natural environment. She is particularly concerned that neo-classical economic models are inadequate when considering environmental factors. For example, the efficient market hypothesis relies on an assumption of perfect information, which is clearly a ‘nonsense’ in this field, given that most investors have only a limited understanding of environmental risks. Gail Tverberg, an environmental blogger and former insurance actuary, has similar concerns. Tverberg highlights the implicit assumption that the economy is independent of the physical resources that underlie it, and the resulting expectation that the economy can continue to grow in spite of physical resources becoming increasingly difficult and expensive to extract. She thinks the financial situation could go downhill quickly, in ways people have not been warned about, and predicts that most people will never make the connection with resource limits. Chris Gingell, who of our four interviewees is probably the closest to a ‘traditional actuary’, is also concerned about the political challenges – the difficulties governments have in investing in and supporting long-term schemes and the effect that the resulting regulatory uncertainty has on other investors. Gingell works for the Willis Global Solutions Consulting Group and has clients in the energy industry. He says that, although he doesn’t keep his actuarial background hidden, “there’s always a danger that a client might assume an actuary wouldn’t understand their industry because ‘it’s nothing to do with pensions’.” All four actuaries find the thrill of working on new and uncharted projects in sustainability a major factor in their enjoyment of their
THE ACTUARY • June 2013 www.theactuary.com
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