Longevity climate change scenarios
Mercer’s new longevity climate scenarios help schemes quantify this risk in a way that:
- Complies with best practice TCFD requirements.
- Is based on thorough and up to date global and UK research.
- Uses credible, distinctive and relevant scenarios, which:
– quantify the wider macro-economic and health related impact of climate change on longevity as well as changes in heat/cold related deaths;
– can be integrated with Mercer’s climate change financial market/investment modelling; and
– help support clear and comprehensive TCFD reporting.
Webinar replay: Climate change and longevity - the impact on your DB scheme
What do regulations and guidance say about longevity scenario analysis?
The overall approach is that scenarios should be credible, distinctive and relevant, and reporting in the published TCFD report should be clear and comprehensive.
DWP guidance expects a quantified, holistic approach that brings together investment, longevity and covenant considerations. Mercer have developed models that provide this and we expect such robust analysis to become the new-norm for any £1bn+ pension schemes that provide defined benefits.
TCFD Requirements
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At least triennial
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Quantitative “as soon as practicable”
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Paris-alignment
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Include longevity
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2+ scenarios
Watch our video to find out more
Mercer’s solution
Recognising how specialised climate change modelling is, in building our longevity scenarios, we have also sought extensive input from researchers and scientists outside Mercer by developing these in partnership with Risk Management Solutions (RMS). RMS are a leading provider of solutions for climate change and longevity modelling. The combination of Mercer’s experience in sustainable investment consulting, climate consulting and longevity modelling, and RMS’s research and technology provides a strong balance of robust technical climate longevity scenarios and action oriented advice.
Our recommended approach for TCFD longevity scenarios is:
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ThoroughTCFD disclosures must be publically available, so there is potential for great scrutiny from members and more widely.
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Holistic and completeThe typical maturity of DB scheme liabilities, and the balance of positive and negative impacts in the UK, make direct effects of temperature change on heat/cold-related deaths unlikely to cause material funding risks. However, climate change scenarios can be associated with wider macro-economic and health-related impacts that are key (positive or negative) drivers of longevity.
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Credible, distinctive and relevantOur scenarios harness transparent and thorough research from climate-modelling experts RMS. RMS have modelled “global pathways” that defined by UN research from the Intergovernmental Panel on Climate Change, measure the consequences on UK mortality thanks to information and research from the UK Climate Resilience Program, the Met Office, and their own population-modelling expertise.
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Clear, comprehensive and consistentOur scenarios are consistent with Mercer’s investment modelling, enabling the reporting of outcomes and methodology through a consistent framework. As with our investment models, it is recognised that implications of each scenario can be scheme-dependent, and we ensure our outcomes are specific to each scheme’s profile and maturity.
UK Head of Longevity Analytics, Mercer
Principal Longevity Consultant, Mercer
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