Pension Pots?
Warning: This article contains extremely troubling information.
Tom Hardy is co-founder of MP Watch. The following is, in part, adapted from his article in Bylines.
Unmitigated climate breakdown will sink the economy, but it doesn’t have to be like this!
In their Global Risks Report 2024, the World Economic Forum are very clear. They state that the three most critical risks to business over ten years are: External weather events; critical change to Earth systems; and biodiversity loss and ecosystem collapse. In other words, climate change.
We may usefully note that the fifth most dangerous risk identified over ten years was misinformation and disinformation! Over two years they’re identified as the number one risk.
The Minsky Moment:
In the Financial Times of August 18th 2023, Vanessa Houlder and Nathalie Thomas write that the business world is thoroughly under-prepared for climate change, and hugely under-insured against it. They worry about a “Minsky moment” when the markets abruptly collapse as investors and corporations take fright – as they will when the economic implications of climate change suddenly become obvious.
Our futures are in there!
Tom Hardy and the actuaries:
Tom Hardy met with Louise Pryor and Nick Spencer, senior representatives of the actuarial world. They are President of The Institute and Faculty of Actuaries (IFoA), and council member and chair of the Institute’s sustainability board, respectively.
They are go-to experts on calculating risk for insurance companies and pension funds.
Pryor and Spencer told Tom they despaired of the dismissal of their warnings on climate. Media and Government typically respond with rhetoric, spin, misinformation, and disinformation.
Carbon tracker recently revealed that many pension funds are dangerously ignorant of climate science. They use “… investment models that predict that global warming of 2 to 4.3°C will have only a minimal impact on member portfolios, relying on economists’ flawed estimates of damages from climate change, [predicting] that even with 5 to 7°C of global warming, economic growth will continue.”
The Carbon Tracker report points out that such deeply flawed economic studies cannot be reconciled with warnings from climate scientists that such warming would be “an existential threat to human civilisation.” We know that at 7 Celsius warming, weather systems will be so disrupted that we will not survive.
Three provisional scenarios
Pryor and Spencer envisaged three provisional scenarios – the orderly pathway, the disorderly pathway, and the failed transition pathway.
The Orderly Pathway, accepts that climate impacts harmful to the economy are already locked in. We can expect an economic loss of around 15% over 30 years. The trajectory is downwards, ongoing. This is the best we can expect if we manage to stay below 2 degrees Celsius warming.
The Disorderly Pathway predicts that by 2025 we will experience a ‘Minsky Moment’ – a sudden, major collapse of asset values when the markets are spooked. We would see losses of 25% in living standards over 30 years, and they will continue to fall steadily thereafter.
A Failed Transition will occur if emissions continue to rise as they are doing now. We’d be on track for an unimaginable 50% of losses by 2060. For more information, see the original article.
The IFoA warns that on present trends we must expect a failed transition:
“ ... with a failed transition we will no longer be able to outrun destruction and the decline is locked in ... the damage and disruption caused by climate change [will] overwhelm ...”
We would see a complete breakdown of civilisation. This would be irreversible and exponential as we passed climate tipping points.
As with climate tipping points, the economic dominoes will fall. A pension depends on equity. If funds tank, pensions fail; those without pensions will sell houses (if there are any buyers); those without houses will become destitute; businesses will not be underwritten, leading to mass unemployment; life expectancy will plummet. Society will implode.
The IFoA amplifies the alarm: “Insurance leaders have unequivocally stated that if climate change raises average temperatures to 4 ̊C above pre-industrial levels most assets will be uninsurable. Without insurance, investment, finance, business slow to a halt – we will no longer have an economy.”
The parliamentary Committee on Climate Change has warned that 4 ̊C is where we are headed if urgent action is not taken.
We can afford to mitigate, relatively easily, and we most certainly can’t afford not to!
Pryor says: “The Government tends to say things are too expensive when generally the opposite is true.” Ministers and vested interests baulk at the estimated $3.5 trillion spending per year globally, but need to be reminded that the costs of unchecked climate change top out at around $551 trillion. This is more money than there is on Earth!
If you find this disturbing, please write to your MP and say so.
Please demand policy which genuinely (and immediately) follows the science.
No more spin. No more disinformation.
It’s time to see the truth, tell the truth and act on the truth.
