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New roadmap for insurers to tackle the decline in nature

Insurers and long-term savings providers should become 'nature positive' in helping tackle the decline in the nature according to Association of British Insurers (ABI).

ABI said nature loss is exposing homes and businesses that insurers protect to a wide range of risks, such as flooding, hence, it is important to provide relevant guidance to the insurers. The ABI launched a guidance book for its members at its third annual climate change summit in July 2023. Nature, which includes biodiversity together with geology, water, climate and all other inanimate components that make up our planet, is in a serious decline. There has been a 70% drop in global wildlife populations since 1970. Around 84% of rivers are in poor ecological health.

Drivers for this worrying loss include climate change, changes in land use, pollution and invasive species. Compelling reasons for action:

  • Nature loss exposes the homes and businesses that ABI members protect across the UK to a wide range of risks, which in turn will impact markets and financial performance.

  • Some studies have estimated that half of global gross domestic product – $44tn – is highly to moderately dependent on nature.

  • Impact on health. There is a clear link between physical and mental health and healthy ecosystems. This impacts on the business models of long-term savings providers, life and health insurers.

  • Consumer pressure. There is a clear reputation risk to firms not seen to be addressing nature loss. For example, 94% of residents polled by the Local Government Association in UK in 2021 wanted more local biodiversity.

  • Net zero cannot be achieved with innovation and new technologies alone. We need nature to absorb carbon from the atmosphere and provide resilience. So, carbon credits and offsets must inevitably incorporate nature.

ABI said its guide will help firms begin to assess the risks and opportunities, so that they develop a strategy for action. This will include:

  • Identifying external organizations, tools and best practice examples for expertise and guidance

  • Developing a heatmap as an initial estimation of possible impacts and identifying focus areas.

  • Learn from best practice form ‘early movers’ in the sector.

  • Setting up internal working groups within firms, leading the agreement of guiding principles, including governance and accountability.

ABI said we will support our members, through collaboration and sharing best practice, consumer advice on ‘nature positive’ behaviours, and how the sector’s fraud tackling expertise can help address environmental crime, like illegal deforestation.


Ecosystems are beyond 'tipping point' now

Extreme weather events such as wildfires and droughts will accelerate change in stressed ecosystems leading to quicker tipping points of ecological decline according to a new study published by Rothamsted Research.

The research published in a recent issue of scientific journal Nature Sustainability revealed that continuous stress from factors such as unsustainable land use, agricultural expansion and climate change, when coupled with disruptive episodes like floods and fires, will act in concert to imperil natural systems.

Using computer modelling, the research team looked at four ecosystems under threat to work out what factors might lead to tipping points, beyond which collapse was inevitable. The team led by Rothamsted Research professor Simon Willcock, looked at two lake ecosystems and two forestry examples, including the historic collapse of the Easter Island (Rapa Nui) civilization, widely thought to have been the result of over-population combined with unsustainable exploitation of tree cover.

In some systems, the combination of adding new extreme events on top of other ongoing stresses brought the timing of a predicted tipping point closer to the present by as much as 80%.

The models were run over 70,000 times for each ecosystem, with variables adjusted on each occasion. Up to 15% of collapses occurred as a result of new stresses or extreme events, even while the main stress was kept constant. In other words, even if ecosystems are managed more sustainably by keeping the main stress levels like deforestation constant, new stresses like global warming and extreme weather events could still bring forward a collapse.

Professor Willcock said, “Over a fifth of ecosystems worldwide are in danger of collapsing. However, ongoing stresses and extreme events interact to accelerate rapid changes that may well be out of our control. Once these reach a tipping point, it’s too late.”

The number of extreme climate events has increased since 1980 and global warming even at 1.5°C will increase those numbers further. Scientists are also concerned about possible knock-on effects as one collapsing ecosystem impacts on neighbouring ecosystems.

Co-author of the study professor John Dearing said, “Previous studies of ecological tipping points suggest significant social and economic costs from the second half of the 21st century onwards. Our findings suggest the potential for these costs to occur much sooner.”


Shrinking Arctic glaciers are unearthing a new source of methane

Shrinking glaciers in the warming Arctic are exposing bubbling groundwater springs which could provide an underestimated source of the potent greenhouse gas methane according to a new research study.

The new research published in a recent issue of scientific journal Nature Geoscience said these methane emissions will likely increase as Arctic glaciers retreat and more springs are exposed. This, and other methane emissions from melting ice and frozen ground in the Arctic, could exacerbate global warming.

The study, led by researchers from the University of Cambridge and the University Centre in Svalbard, Norway, have identified large stocks of methane gas leaking from groundwater springs unveiled by melting glaciers.

University of Cambridge department of Earth sciences researcher and lead author of the study Gabrielle Kleber said, “These springs are a considerable, and potentially growing, source of methane emissions — one that has been missing from our estimations of the global methane budget until now.”

Scientists are concerned that additional methane emissions released by the Arctic thaw could ramp-up human-induced global warming. The springs the researchers studied hadn’t previously been recognized as a potential source of methane emissions.

University Centre in Svalbard professor and co-author of the study Andrew Hodson said, “Living in Svalbard exposes you to the front-line of Arctic climate change. I can’t think of anything more stark than the sight of methane outgassing in the immediate forefield of a retreating glacier.”

“Previously, research centred on methane release from thawing permafrost (frozen ground). While the focus is often on permafrost, this new finding tells us that there are other pathways for methane emissions which could be even more significant in the global methane budget.”

The methane-delivering springs, the research team identified are fed by a plumbing system hidden beneath most glaciers, which taps into large groundwater reserves within the underlying sediments and surrounding bedrock. Once the glaciers melt and retreat, springs appear where this groundwater network punches through to the surface.

The researchers found that methane emissions from glacial groundwater springs across Svalbard could exceed 2,000 tonnes over the course of a year — which equates to roughly 10% of the methane emissions resulting from Norway’s annual oil and gas energy industry.

This source of methane will likely become more significant as more springs are exposed. Ms. Kleber said, “If global warming continues unchecked then methane release from glacial groundwater springs will probably become more extensive.”


Risk of isolation increases with sea-level rise

Scientists and general public alike speak about the rising sea levels and mainly focus on the communities that will be flooded permanently, but rising seas will isolate people much before they are underwater.

A new research report published in the journal Nature Climate Change by a team of researchers University of Maryland US and University of Canterbury, New Zealand has said people will be cut off from roads and other critical infrastructure long before they are underwater. It is a threat that society has not paid enough attention to. The study said the typical displacement metric for sea-level rise adaptation planning is property inundation. However, this metric may underestimate risk as it does not fully capture the wider cascading or indirect effects of sea-level rise.

The report says to address this issue, it is proposed to complement it by considering the risk of population isolation: those who may be cut off from essential services. Investigate the importance of this metric by comparing the number of people at risk from inundation to the number of people at risk from isolation.

Considering inundated roadways during mean higher high water tides in the coastal US shows that although highly spatially variable, the increase across the US varies between 30% and 90% and is several times higher in some states.

The study revealed that the risk of isolation may occur decades sooner than the risk of inundation. Both risk metrics provide critical information for evaluating adaptation options and giving priority to support for at-risk communities.

An author of the study Ms. A Reilly said, “While sea level rise is often considered a problem for the far future, people will start getting isolated much sooner. “It is very possible that we could see that in our lifetimes.”

The study said, “Worse still, many places currently considered at low risk of sea level rise suddenly become much more vulnerable when isolation is taken into account. While planners know that low-lying Florida will be severely inundated, Maine, with its high rocky coasts, is generally thought to be at low risk. But the study team’s work shows many Mainers are vulnerable to being cut off by flooding in coastal communities and river valleys.”

Ms. Reilly said this far more immediate effect of rising seas needs to become part of the broader planning process, both in terms of the adaptations and protections we build and also in how we prepare for the pending wave of climate migrants as people leave places where the quality of life has become too burdened by sea level rise.


Financial institutions still underestimating climate risks

Financial institutions may still be underestimating climate-related financial risks due to a disconnect between climate scientists, economists, model builders and financial institutions according to a new report by the Institute and Faculty of Actuaries (IFoA) and the University of Exeter.

The 32-page Emperor’s New Climate Scenarios – a warning for financial services study report reveals that companies often use models that produce ‘implausible’ outputs and have significant blindspots when it comes to estimating potential hazards, exposures and vulnerabilities under different climate scenarios.

This ultimately limits the usefulness of these models in assessing the true extent of financial institutions’ (of banks, insurers and investment firms) climate risks. For example, the report says the current modelling techniques exclude many of the most severe impacts expected from climate change, such as the emergence of climate tipping points and secondary effects, like global food supply shocks and mass migration. As a result, they generate overly benign outcomes, which can mislead financial institutions on the full extent of their risks and potentially delay action on decarbonization.

The report recommends that to improve financial firms’ climate risk assessments, the model users should become climate literate and use these tools alongside narrative scenarios that qualitatively describe the potential risks and their impacts.

Additionally, institutions should incorporate out-of-model adjustments and error margins in their analyses to account for uncertainties that the models fail to capture. The other major recommendations of the report include:

  • Carbon budgets may be smaller than anticipated and risks may develop more quickly

  • Regulatory scenarios introduce consistency but also the risk of group think, with scenario analysis outcomes being taken too literally and out of context

  • Education is needed on the assumptions underpinning the models and their limitations

  • The development of realistic qualitative and quantitative climate scenarios is required

  • Model development is required to better capture risk drivers, uncertainties and impacts

A press release issued by IFoA said, “In the study we have used actuarial principles to examine the limitations and assumptions in relation to climate-change scenario modelling practices in financial services, focusing on hot-house world scenarios of three degree °Celsius or more of warming.”

The IFoA said the objective in writing this paper is to help accelerate the progress of more realistic scenario modelling, which, it hopes, will help to further accelerate the progress on decarbonization.



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