Actuaries and financial institutions must treat biodiversity loss as a systemic financial risk, after a new report warned that nature degradation is already threatening food security.
The Institute and Faculty of Actuaries (IFoA) and Anglia Ruskin University warned that this could affect inflation, investment portfolios, public finances and social resilience.
Their report, ‘Planetary Solvency: Tipping into the wild unknown’, argues that soil degradation, water scarcity and pollinator decline are already reducing crop yields and increasing food price volatility.
These pressures are being compounded by acute shocks, including extreme weather, trade disruption and geopolitical conflict. For instance, the report comes as conflict in the Gulf region threatens to place further pressure on supply chains passing through the Strait of Hormuz.
Sandy Trust, lead author of the IFoA Planetary Solvency report, said: “Events in the Gulf region pose a significantly greater risk to global food security than in 2022, when the combination of a Ukraine energy crisis and extreme weather events impacted harvests, driving up prices.
“Now the climate is warmer, and the Strait of Hormuz is the conduit for around 30% of global fertiliser. If this is not applied during key planting seasons, it cannot be replaced later.”
Trust warned that higher energy prices could be compounded by global food shortages, creating the potential for structurally high inflation.
‘Collapse of nature’ warning
The report says food system fragility should be recognised as a systemic financial risk, with impacts that extend well beyond agriculture’s direct contribution to gross domestic product.
“Our economy is set up to deliver efficiency, profit and a just-in-time system that… provides little to no resilience against nature collapse.”
Aled Jones, Anglia Ruskin University
It warns that pollinator decline could reduce crop yields and increase food prices, given that pollinators underpin around three-quarters of global crop production. It also points to large-scale deforestation, particularly in the Amazon rainforest, which threatens rainfall patterns and global carbon cycles that support stable crop yields.
Aled Jones, lead author and director of the Global Sustainability Institute at Anglia Ruskin University, said the UK government’s National Security Assessment on Global Ecosystems had shown that “the potential collapse of nature is a realistic possibility”.
“Our current economy is set up to deliver efficiency, profit and thereby a just-in-time system that both drives this threat and provides little to no resilience against it,” he said.
“We need radical new policy and direction to tackle these emerging risks.”
The report calls for urgent investment in sustainable land use, protection for pollinators and stronger supply chain resilience. It also urges policymakers, regulators, actuaries and the wider financial sector to use integrated climate-nature scenarios.
The role of pension actuaries
Paul Sweeting, president of the Institute and Faculty of Actuaries, said: “Nature loss is not only an environmental crisis but a serious risk to economic stability and societal resilience due to the rise in food insecurity.
“Actuaries have a critical role in identifying, measuring and managing these systemic risks, ensuring they are not overlooked in financial and policy decisions.”
The findings come as Ortec Finance warned that pension schemes should pay closer attention to the impact of climate risk on sovereign debt and private assets.
Its 2026 climate scenario update suggests that higher warming scenarios could put pressure on national debt levels, sovereign risk premiums, and bond returns, while also affecting long-term infrastructure and real estate investments.
“Investments made now into infrastructure or real estate typically have a 15-year-plus time horizon, so these are highly likely to be affected by rising physical climate risks.”
Maurits van Joolingen, Ortec Finance
Maurits van Joolingen, managing director for climate scenarios and sustainability at Ortec Finance, said climate risk had been “an important missing link in the total portfolio assessment of climate risk”.
He added: “Pension funds investing in private assets need to be aware of the physical climate-related risks associated with holding these assets, which are typically less liquid and held for much longer than equities or bonds. Investments made now into infrastructure or real estate typically have a 15-year-plus time horizon, so these are highly likely to be affected by rising physical climate risks.”
