COP29 Update – Actuaries Ramping Up Climate and Sustainability

The actuarial profession has been building its capacity and profile in climate and sustainability. Rade Musulin represented the Institute at COP29 as the International Actuarial Association’s delegate, identifying new opportunities for the profession. 

I was once again honoured to represent the global actuarial profession at the 29th Conference of Parties (COP) climate summit, held this year in Baku, Azerbaijan, from 11-22 November. The International Actuarial Association (IAA) has been accredited as a non-governmental Organisation (NGO) with observer rights by the United Nations. This allows the IAA to send a representative to COP with “Blue Zone” access to the diplomatic area where negotiations are held, and where scientific and technical presentations are made in various country pavilions. 

COP has two broad areas of activity. It is an annual gathering of the world’s leading experts in climate, adaptation, technology, economics, and other disciplines where papers and studies are released and presented. It is also a diplomatic gathering, where member governments gather to negotiate agreements on matters such as emissions reductions and adaptation funding for developing countries. While the latter activity captures most of the media attention, the IAA’s focus is on the former. 

Key themes of COP29 

COP29 was promoted as the “Finance COP”, where countries were expected to find ways to fund mitigation and adaptation activities in developing countries, particularly in the “Global South”. Activists cited a need for several trillion dollars of annual funding, a level which is far beyond the capacity of wealthy countries to fund in the current political environment. In the end, negotiators promised around $300 billion of funding, far less than is required. 

As a result, finance experts are increasingly turning to private capital and carbon markets for funding, trying to shift the governmental role to be creating the frameworks for action and seed money to initiate projects. Carbon markets, where emitters buy offsets which fund projects to remove carbon from the atmosphere or create low emissions energy for developing countries, are increasingly seen as a key to closing the funding gap. 

The recent US election was a major topic of conversation, with many wondering if the election of Donald Trump will reverse progress on decarbonisation in the US and make it more likely that other countries will reduce efforts. Many made the point that the momentum for clean energy is so strong that no one country can stop it. A US Senate delegation came to COP to emphasise that there will continue to be progress despite the outcome of elections. Most countries pledged to continue efforts to promote emissions reductions, renewables, and sustainable practices. 

Summary takeaways 

• Emissions continue to rise despite commitments for reductions. 

• 2024 will be the hottest year on record, joining 2023 to be the two hottest years on record. 

• Mitigation and adaptation will require trillions of dollars, and it is becoming obvious that contributions from developed countries will not come close to that level. 

• The cost of renewable power as measured by the price for solar panels or wind turbines continues to fall, but its carbon footprint and dependence on China are concerns. 

• There is growing support for nuclear power. 

• There is increasing talk of the need to invest in both Carbon Capture and Storage and Carbon Dioxide Removal. 

• Carbon markets are becoming a key component of climate finance. 

• Workforce needs, skill shortages, and “just transition” were prominent. 
• Trade issues are surfacing, with many pushing back against the EU’s border adjustment mechanisms as an unfair trade practice.

Areas of IAA focus at COP29 

The IAA is focused on building relationships with key organisations involved in climate policy and identifying opportunities for the profession to expand its footprint in emerging areas. From that perspective COP29 was a success, including: 

• Initial meetings were held with the leadership of the new IPCC AR-7 working groups and there will be follow-up meetings to establish working parties like those the IAA had with the AR-6 teams. Prior efforts led to projects like the IPCC-IAA joint publication “Climate Science – A Summary for Actuaries”. 

• There was also a meeting with leaders of the IFRS Foundation and ISSB to discuss future work. This will include IAA participation in ISSB events and insights into future nature-based standards. 

• APRA’s Sean Carmody was at COP and is active in the Network for the Greening of the Financial System (NGFS). The NGFS has developed important scenarios used in climate reporting and is moving into adaptation. The IAA hopes to build relations with the NGFS in coming years. 

• In meetings with many carbon market participants, it is clear they are keen to develop insurance products to protect projects and unlock new sources of finance. They see actuaries as key to insurers’ participation and want to educate our profession on how the markets work. I see significant opportunities for actuaries in this area, as skills we have developed in pricing and risk management can be applied to carbon projects. 
• Meetings with many other organizations including the UNDP, UNEP, UNEP-FI, WMO, AFDB, OECD, and IMF.

The future is promising 

There is no question that actuaries have many opportunities in climate and sustainability in coming years. The Institute has recognised this by elevating the Climate and Sustainability Working Group to a Practice Committee and supporting the IAA in global efforts such as participation in COP. The Institute is evaluating ways to enhance education for students and members in this space (more on that in a future Actuaries Digital article). It is also active in public policy. I look forward to helping open doors for the profession in this growing area.

Useful reports 

COP is an opportunity for various organisations to release reports on relevant topics. Following is a selection of them with links for those interested in further reading: 

• UNEP: Emissions Gap Report 2024: No more hot air … please! 
• UNEP: The Adaptation Gap Report 2024: Come hell and high water 
• UNEP: Closing the Gap: The emerging global agenda of transition plans and the need for insurance-specific guidance 
• UNEP: An Eye on Methane 2024 
• World Bank: Navigating Decisions on Carbon Markets 
• NGFS: Conceptual Note on Adaptation 
• SIF: Supervisory Thinking on Insurance-related Climate Transition Plans 
• OECD Review on Aligning Finance with Climate Goals 
• OECD: The Climate Action Monitor 2024 
• OECD: Pricing Greenhouse Gas Emissions 2024 
• WMO: State of the Global Climate Update 2024 
• WMO-WTO: Supporting the Renewable Electricity Transition through Trade: Unlocking Re-Globalization Opportunities via Interconnection 
• EMSA: Market Report on EU carbon markets – 2024 
• IFRS: Progress on Corporate Climate-related Disclosures—2024 Report 
• IFRS: Sustainability-related risks and opportunities and the disclosure of material information 
• Deloitte: Adoption of IFRS Sustainability Disclosure Standards by jurisdiction 

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