Published: 21 January 2013 at 12:04
Anglia Ruskin and Institute and Faculty of Actuaries research shows danger of inaction
New research published by Anglia Ruskin University and the Institute and Faculty of Actuaries highlights the risks that resource constraints pose to the global economy and financial services, and in particular pensions.
The Institute and Faculty of Actuaries conducted a series of literature reviews to explore the current evidence for resource constraints and climate change. To build on this work, the Global Sustainability Institute at Anglia Ruskin was commissioned to undertake further research and modelling of the possible impacts of resource constraints on actuarial advice.
The research found that the evidence for resource constraints is significant but this is not currently factored in to decision-making by politicians, economists and business leaders in a meaningful and proactive way.
The authors examined the current situation and projections for a range of resources including oil, coal, natural gas, uranium, land, food, water and metals. For example, the report details how at the current rate of consumption there is only 50 years of oil remaining, while worldwide supplies of coal will run out in just over 100 years.
Using actuarial modelling techniques that project ahead for 25 years and longer, and applying this model to pensions, several scenarios were generated, ranging from positive to severely negative.
Reactive policies and responses to resource constraints all led to negative outcomes and in one scenario this led to the collapse of pension savings. Were the global economy to go into long-term decline the legal basis on which financial products sit could conceivably be undermined, the sponsor employer may no longer exist to pay contributions and the financial markets may also cease to exist, at least in their current form.
However, if governments and economic agents anticipate resource constraints and act in a constructive manner, many of the worst affects can be avoided.
Peter Tompkins, from the Institute and Faculty of Actuaries said:
Dr Aled Jones, Director of Anglia Ruskin’s Global Sustainability Institute and an author of the report, said: