Actuaries are taking on a rapidly expanding role in helping pension schemes understand and manage climate-related risks, according to a thematic review from the Institute and Faculty of Actuaries (IFoA).

The report warned that climate scenarios once considered “tail risks” were increasingly entering the central range of expected outcomes, heightening the need for robust analysis across the pensions sector.

Indeed, the review found that climate considerations were now embedded across most core areas of pensions actuarial work, including funding and valuation, asset-liability modelling, covenant assessments, strategic investment advice and governance.

Actuaries reported particularly strong involvement in investment-related work, reflecting regulatory focus and rising demand for climate-risk reporting from pension schemes and their advisers.

In addition, several case studies showed how climate analysis was influencing real-world pension decisions.

One example detailed how actuaries developed environmental, social and governance (ESG) and climate-scoring tools to help schemes assess insurers’ sustainability credentials during bulk-annuity provider selection.

Others describe actuaries' involvement in scenario analysis, net-zero pathway development, and the integration of climate metrics into workplace default funds and delegated investment mandates.

The report framed this work against a deteriorating scientific outlook.

The IFoA cited the World Meteorological Organisation’s latest data showing average global temperatures in 2024 were already 1.55°C above pre-industrial levels, which it says is placing previously agreed climate goals under severe strain and increasing risks to long-term financial assets.

Meanwhile, despite growing activity, actuaries noted that the impact of climate work is not yet filtering through consistently to pension scheme clients.

Indeed, while more than half of respondents said actuarial involvement had a high impact within their own organisations, only around one in five said the same for clients.

Many pointed to the ongoing challenge of building engagement beyond regulatory requirements, with budgets often constrained for non-mandatory climate projects.

Regulation remains the dominant driver of climate action, with actuaries highlighting the influence of the Task Force on Climate-Related Financial Disclosures (TCFD) reporting requirements and Prudential Regulation Authority (PRA) expectations.

Some respondents said it can be challenging to apply existing actuarial standards to complex climate risks, while others warned of a disconnect where standards may demand more rigour than clients are required to deliver.

In addition, a majority of respondents felt the current level of guidance for actuaries was insufficient, and the IFoA’s regulatory board has confirmed it is exploring how professional and ethical materials can be strengthened.

The review also found rising numbers of actuaries moving into senior climate leadership roles, particularly in investment and risk functions.

Participants stressed that the profession’s long-term outlook, quantitative skills and experience working with imperfect data positioned actuaries well to support decision-making on climate and sustainability risks.

Concluding the report, the IFoA warned that climate-related risks are “crystallising”, with tipping points now appearing in mainstream projections rather than extreme scenarios.

It stated that actuaries have a critical role to play in helping pension schemes navigate this landscape by providing evidence-based analysis, supporting policy development and contributing to resilient long-term strategies.

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