Actuarial modeling is the set of techniques used in a field, typically insurance, to represent the functioning of industries and calculate probabilities of certain events. There are standard models that are used in everyday practice, but modeling is also an opportunity to be proactive from a sustainability standpoint. One prime example of this is the triple bottom line accounting framework.

In recent years, there has been research about how actuaries are able to further develop the framework to turn it into a model that can measure affects and impacts into the future and beyond a single reporting period. Actuarial Review explains that “the rigor and data orientation of the actuary [is] essential to seeing through often emotional and politically driven public narratives” around existential crises like climate change.

As a recent IPCC report Climate Science: A Summary for Actuaries – What the IPCC Climate Change Report 2021 Means for the Actuarial Profession states, “Actuaries can no longer rely on past experience to assess risks without taking into account the potential impacts of climate change.” 

Mitigation

Mitigation is something we hear so much about when it comes to being sustainable and when we talk about risks. People are constantly talking about mitigating the impacts of climate change and other sustainable issues. It is the duty of an actuary to mitigate risks. The primary field of work for actuaries is the insurance industry. This industry is in a favorable position when it comes to mitigating climate risks. There are practices that they can implement internally to make an impact, such as: 

• Adopt sustainable investment practices  
• Measure and reduce internal emissions, including suppliers
• Follow regulations and prepare sustainable reports 

They can also encourage others to be sustainable by incorporating: 

• Pay as you drive programs 
• Hybrid discounts 
• Discounts for LEED-certified buildings or energy efficient homes 
• Replace/rebuild with more eco-friendly and sustainable materials 
• Green commercial property insurance policies and endorsements 

Learn about more sustainability concepts within this major.