If you want to know the truth…FOLLOW THE MONEY! The people who control the world’s money rely on financial risk assessors to …
in October 2023 we took a look at some new analysis by a team of experienced climate scientists and actuaries who’ got together to apply the hard-nosed real world principles of Financial Risk Management to the rather more cautious and consensus-driven world of climate projection the report made for a pretty St juer position of approaches that suggested that the climate bods were being a bit hamstrung in their efforts to highlight the seriousness of our situation by policy makers who essentially didn’t want to overly concern their citizens and cause them to vote for someone else who might tell them a nicer story well now that original piece of work has been followed up by this latest report which adds a bit more context and color to the Actuarial appraisal and the conclusions are challenging before we Harriet hello and welcome to just ever think for this latest piece of work two of the original paper authors Sandy trust and Timothy Lenton have been joined by actuary and chair of the resources and environment board Oliver Bettis deoe sustainability actuary Lucy SE Georgina bham from the UK government actuaries Department exitor University maths and stats pH HD grad Dr Jesse abon and Dr Luke Kemp senior research associate of The nraam Institute of advanced studies in the previous video we took a deep dive into the differences between Actuarial conservatism and climate science conservatism and we discovered the potential dangers of scientific averaging when it comes to climate modeling so I won’t go back over that here but if you haven’t seen that video and it is worth watching it first because it provides the context for what we’ll talk about today and you can do that by picking up there somewhere or by following the link in the description section below the authors of this latest research point out that the rate of global warming accelerated in 2023 and despite a well publicized El Nino event during that time there are nevertheless some early indications that the acceleration is not temporary this chart shows monthly temperature anomalies relative to pre-industrial levels from 1940 to today the last record El Nino year was 2016 and you can clearly see a spike up well above 1.5° C in February of that year but then temperatures settled back down again towards June and stayed relatively flat thereafter that didn’t happen in 2023 though temperatures reached about 1.5° celsus in March last year and then just kept going it’s really not clear at this stage whether that rise will also settle down or whether we’ve reached a new Baseline for warming in which case the climate models need to be revised and so to our Global mitigation and adaptation policies climate risks are increasing globally say the papers researchers and events that used to be regarded as very rare are now becoming increasingly common this chart from the website carbon brief shows all the extreme weather events that are being exacerbated by climate change all over the planet anything in red has The Telltale fingerprint of human influence so you know the vast majority basically according to the consultancy firm V risk total global economic losses from these events now average $400 billion US a year with a likelihood that future infrastructure losses will be in the region of a trillion dollars annually with as little as a quarter of that being covered by any kind of insurance actuaries tend to use charts like this one to provide strong visualization of where we’re currently at this blue curve represents the probability of severe flood events back in 1980 it’s a classic normal distribution curve really so the most severe flooding events are all in this tail bit over here on the extreme right hand side in other words not impossible but very unlikely to happen and here’s where the world is projected to be in 2030 what was the extreme tale 50 years previously will be right slap bang in the middle of the curve by the end of this decade and extreme events that weren’t even on the scale of possibility when I was just starting out at high school are now in scope and represent a much more severe taale to the new curve one of the biggest concerns raised by this paper is the risk of climate tipping points the authors highlight Recent research by D Armstrong McKay at L suggesting that climate tipping points may be triggered at lower temperatures than previously estimated with several at risk in the 1.5 to 2 degre range that we’re now entering things like ice loss in Greenland West Antarctica and the Himalayas permafrost melt Amazon dieback and the halting of major ocean current circulation are projected to interact causing a very unwelcome Cascade effect that could be irreversible from an Actuarial point of view these things can no longer be considered as high impact low likelihood tail risk events which should instead be factored into risk assessments as high impact High uncertainty and increasingly likely events actuaries are acutely conscious of something called Model risk either as a result of using the completely wrong model in the first place which I would characterize as total Muppet or using the right model but implementing it in the wrong way which reminds me of dear old Eric morham I’m playing all the right Ms but not necessarily in the right order or simply misinterpreting the data that the model provides if you’re a bean counter or risk assessor then an estimated probability that turns out to be lower than the real probability is a way bigger problem than an estimated probability that’s higher than reality so actores tend to make conservative worst case estimates with the word conservative in this case meaning conserving your client’s money conservative estimating in climate science by STK contrast means using the lowest common denominator of data averaging based on geopolitical consensus if political action on climate was instead decided from the perspective of financial solvency the first question wouldn’t be what’s the least bad thing we can get away with telling our public it would be how bad can it get under the European solvency regime insurance companies are required to hold enough Capital to survive an unlikely but possible one in2 200e set of Adverse Events this papers authors strongly suggest that society as a whole might reasonably expect a similar standard from our global leaders when it comes to climate mitigation and adaptation policies essentially what these industry and climate experts are saying is that planetary warming above 1.5° C is dangerous not to the planet obviously the planet will be fine so we can all put away our Save the Planet placards because that is most definitely not what we’re talking about here we’re talking about the existential risk to life on the planet not the planet itself which will keep rotating and recalibrating its balancing systems over geological time scales for several billion more years whether we humans and all of Earth’s other species are still breathing or not the point is we humans have never in all our history ever known the planet at the levels of warming that are coming our way in the next 70 years and beyond all these intricately interconnected functions and consequences are being tested and stressed in ways that we simply have no precedent for or experience of and currently no mechanism for dealing with on any kind of globally coordinated basis right now according to this report we’re metaphorically sleepwalking blindfolded with our arms tied behind our backs into an arena filled with a bunch of very hungry Lions so how do we take the blindfold off and untie ourselves then I hear you cry well a proper realistic climate risk assessment is urgently needed according to the paper’s authors maybe get the insurance risk assesses to do it instead of the political leaders a that way we might all be provided with a slightly clearer picture orbe it a more terrifying one the author suggests using a Financial Risk Management technique called reverse stress testing where ensur companies ask themselves the simple question what would ruin us and work out their action plans from there the paper also concludes that we desperately need a mechanism that enables long-term policy decisions and ideally not one that involves an autocratic dictatorship a the author’s solution to that conundrum is something they call a planetary soleny commission so what do they mean by that then well to quote them directly risk management techniques from a variety of disciplines should should be used to develop a global risk management framework that explores the interconnected societal natural climate and economic risks we face and recommends actions to address them planetary solvency should be complemented with long-term governance and risk management this could include radical actions to reduce global temperatures and govern large scale displacement these need to be undertaken carefully democratically and through holistic risk assessments for example comparing the risks of unmitigated climate change versus geoengineering now of course there’s a great deal more data and commentary in the rest of this report that put a lot more flesh on the bones of the bullet points that I’ve highlighted today and far more than we could hope to cover in a short little video like this but I’ve left a link to the paper in the description section below so you can take a deeper dive if you wish and of before I go I must just let you know that we’re already hurtling towards the second everything electric show of the year how time flies the next event is being held at the wellestablished and much loved Yorkshire Event Center up in Harriet from Friday the 24th to Sunday the 26th of May you never know we might actually be having some some decent weather by then and the site has lots of outdoor space for a wider range of new electric vehicles to be on show and of course with the usual attractions for families and space for the kids to run around and generally have a bit of fun I’ll be hosting another six discussion panels too so it’d be great to see you if you can make it the ticket discount code for just have a think viewers is on the screen now along with the website where you can grab your tickets there’ll also be a link to that website on the end screen of this video and in the description section below Harriet is a popular one folks so if you’re thinking of coming along I’d recommend grabbing your tickets early and I’ll hopefully see you there that just leaves a massive thank you as always to my friends over at patreon.com have athink who helped this channel stay independent and a big thank you to you for watching up until now if you like this video and you want to keep up to date on new content then don’t forget to hit the Subscribe button and the notification Bell that way you won’t miss out and you’ll be massively helping the channel get in front of the dreaded algorithm whichever way you choose to support the channel 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