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An abridged version of Praveen's submission to China Conference in Insurance and Risk Management (CCIRM 2025) held recently at Urumqi, China. Organised by Tsinghua University's School of Economics & Management (SEM).
“So if a dead whale is worth a million dollars on a fishing boat and a live whale in the ocean is worth nothing…” warns Daniel Schmachtenberger - something is not right the way our value system is codified in “Humanity Won’t Survive Unless We Change This.” And this value system drives our money pipeline.
Jessica Smith alludes to an important IMF study on the value of great whales for carbon sequestration - estimated at USD 2 million each. She points out, “If industrial-scale whaling had not decimated populations, whales might today be sequestering the carbon needed to keep us within 1.5C - a foregone opportunity for a cost-effective, high-impact nature-based solution.”
Some fragments of handling risk
According to Capital Brief: “The UK’s largest pension fund, The People’s Pension, has moved £28 billion in assets from State Street to Amundi and Invesco, citing the sustainability and responsible investment credentials of the company.
State Street is among a slew of Wall Street giants that have pulled out of the Climate Action 100+ coalition, as US firms increasingly step back from environmental, social, and governance (ESG) programmes that are out of favour with the current administration. State Street will continue to manage the remaining £32 billion in The People’s Pension portfolio, representing a significant exposure to the vital savings of UK pensioners.” This is not the only pension fund putting nature at risk.
Institute & Faculty of Actuaries (IFoA), a UK-based pre-eminent actuarial body, recently released the report Planetary Solvency — finding our balance with nature. Sandy Trust, its lead author, says: “Nature is our foundation, providing food, water and air, as well as the raw materials and energy that power our economy. Threats to the stability of this foundation are risks to future human prosperity which we must take action to avoid.”
Theis IFoA report marks a landmark convergence of risk management in financial services and climate science: “The global economy could face a 50 per cent loss in domestic product (GDP) between 2070 and 2090 unless immediate policy action is taken to address the risks posed by the climate crisis… If left unchecked, the likelihood of mass mortality, large-scale displacement, severe economic contraction, and conflict increases.”
Will the actuarial profession successfully rub this wisdom on the insurance industry and assert its power? As of now, it is business as usual (BAU) in the pursuit of profit.
Integrating natural capital in risk assessment enables financial institutions to understand and assess their exposure to natural capital risks. It helps institutions better understand how environmental changes, such as ocean pollution or deforestation, may impact their portfolios.
While it is a vast and complex discipline, one in particular deserves to be flagged here - Atlantic Meridional Overturning Circulation (AMOC). It is a part of a single ‘conveyor belt’ of continuous water exchange that transports water throughout the world’s oceans. It is the main ocean current in the Atlantic, including at the surface and great depths, that is driven by changes in weather, temperature, and salinity.
Most climate scientists believe that a substantial slowing of AMOC might result in significant, possibly catastrophic, climate change.
Last year, the atmosphere’s concentration of CO₂ rose at the fastest rate on record. Concentrations jumped by 3.5 ppm, reaching 424 ppm in the atmosphere. These concentrations are more than 50% higher than the pre-industrial period.
The Earth is becoming uninhabitable
At the current rate of warming, we are on track to reach a temperature increase of +4°C by 2084. In just 50 years, we could be living on a planet that is largely uninhabitable. Let that sink in, writes Kasper Benjamin Reimer Bjorkskov.
According to the University of Exeter, a 3°C warming could result in the death of 50% of the global population. And yet, we are heading for 4°C if we continue business as usual—expanding fossil fuels, building more, consuming more, and denying what’s right in front of us.
“The Evil Twin of Climate Change, just got teeth,” says Dr Howard Dryden of Goes Foundation. “For nearly 20 years,” he adds “we have been saying that while atmospheric carbon dioxide mitigation is important, it is only a minor greenhouse gas and that it will be impossible to stop climate disruption if it is our only focus. The real existential threat to life on Earth is directly connected to the survival of marine life. Terrestrial ecosystems are important, but we are now in imminent danger of losing marine life in the world's oceans. More than 50% is gone, and the remaining 50% is under threat.”
“For decades, international law has failed to recognise mass environmental destruction as a crime. But the legal tide is turning,” reminds Jojo Mehta, co-founder and chief executive of Stop Ecocide International. “Criminalising ecocide marks a turning point in human consciousness,” writes Financial Times.
Carbon mitigation will not stop catastrophic climate change, but it buys us time (5 to 10 years) to regenerate nature and perhaps prevent average temperatures exceeding 3°C increase, emphasises Howard Dryden.
We need action now to eliminate the worst of human pollution by the end of this decade, or it will be too late to avoid a total collapse of the marine and terrestrial ecosystems over the next 20 years. Humanity is part of Nature, and without healthy terrestrial and marine ecosystems, we cannot survive. 96% of all mammals on the planet are human-farmed animals. Around 70% of all nature on land and marine life in the Oceans has been lost since 1970, and more than 90% since 1900.
In this context, controlling climate change is insignificant to the loss of nature, but the recovery of nature has the potential to stop climate change. Water vapour represents 75% of all GHG, and methane and carbon dioxide are considered the only greenhouse gases that can be controlled as a means of regulating temperature and atmospheric water vapor pressure.
Switching on the biggest historical polluter
Climate change is not a top priority for most Americans. According to a February 6, 2023 Report by the Pew Research Center (Pew), only 37% of Americans regard dealing with climate change as a top priority. It is 17th on a list of 21 priorities, ahead of addressing global trade (although that’s probably higher now), dealing with issues around race, tackling challenges faced by parents, and managing the coronavirus outbreak.
The top issues are strengthening the economy (75%), reducing health care costs (60%), defending against terrorism (59%), reducing the influence of money in politics (59%), and making Medicare financially sound (58%).
Global circularity is tumbling
Hans Stegeman of Triodos Bank shares the CGR 2025. He says the news isn’t good. Having fallen yet again, from 7.2% in 2018 to just 6.9%. That means over 93% of the materials used in our global economy are still linear: extracted, used once, and then either thrown away or burned.
This is not just a missed opportunity; it is a significant one. It’s a deepening crisis. Global material use has tripled in 50 years, now surpassing 100 billion tonnes annually. Despite rising awareness, our dependence on virgin materials continues to grow faster than we can recycle or reuse. And while secondary material use is up slightly in absolute terms, it’s not keeping pace with total resource consumption. The result? An ever-widening circularity gap. We could meet our needs with just 70% of today's material use
The circular economy is not just about recycling more. It’s about redesigning systems — mobility, housing, and food— to use fewer materials in the first place.
Let’s stop celebrating “green growth” while material use continues to soar. Achieving a circular economy demands more than policy adjustments. It calls for a deep systemic shift. At present, there’s little indication we’re heading in that direction.
Assertive BaFin
According to BaFin, only 20% of banks and insurance companies have so far used early warning indicators for physical risks. While insurance companies often lack models and databases, banks lack location-based data in particular. BaFin's message was clear: climate risks must be collated, priced, and above all, measured quantitatively in a risk-oriented manner.
The EBA Guidelines on ESG Risk Management, published in January 2025, illustrate the growing regulatory pressure. From January 2026 (for large institutions) and 2027 (for small and non-complex institutions), banks will be required to conduct regular materiality assessments with a minimum 10-year horizon.
Sustainability is no longer an option, but an obligation. The key lies in cooperation between different financial market players and knowledge transfer, especially from the insurance sector, which has a head start in capturing physical climate risks.
The Fed relents
Having withdrawn from the Network for the Greening of the Financial System (NGFS), the US Fed demonstrates yet another failure of leadership from an institution whose indifference to the growing climate crisis has been as consistent as it has been disappointing.
The Fed’s latest abdication of its responsibilities is unjustified on the merits, will put the US government and financial sector at an economic and competitive disadvantage, and threatens to undermine the US central bank’s long-term credibility.
In his testimony before the US Congress, Federal Reserve Chair Jerome Powell issued a strong warning about the increasing cost and decreasing availability of property and rental insurance resulting from climate-related risks. The increasing risks of climate change, he said, are causing banks and insurance companies to withdraw from certain areas of the country. Entire regions of the US are becoming increasingly unbankable, uninsurable, and uninhabitable.
Now, climate change per se is not a risk
At least not if there’s no price agreed upon by the market wizards behind the Bloomberg terminals, explains Sasja Beslik: “Climate change is a macro theme.” Yes, it may carry a certain stench of cost when examining particular supply chains, distant regions, or a handful of companies. But in general - yes, in general - it bears little weight in the Babel towers of finance.
How is that the case? Well, the cost of the rather brutal consequences of climate change is socialised. Companies rarely pay the full cost of the externalities they cause through their business operations. And that is perfectly accepted by politicians, as well as by consumers around the world. It’s the way we have built our world.
Keeping ESG alive
It’s been a rough few years for ESG - the popular shorthand for measuring and managing a company’s environmental, social, and governance performance. Critics on the political left believe ESG is insufficient for addressing major societal issues such as climate change; critics on the right say ESG pushes a liberal agenda. The barrage of criticism has caused ESG to lose its luster among many executives. Yet the need for a transparent way to connect a company’s financial performance with its ESG performance remains. It’s time, says Oxford professor Robert G. Eccles, to take stock of ESG and chart a path forward.
He acknowledges the complex challenges that still need to be resolved. Chief among them is whether to use single materiality (which focuses on shareholder value) or double materiality (which includes societal impact). Here, Eccles recommends a pragmatic approach for corporate leaders: clearly define corporate purpose, improve transparency in ESG reporting, and engage stakeholders constructively. These strategies will help companies manage ESG pressures by focusing on material issues that affect shareholder value while also acknowledging and addressing broader societal impacts.
Post growth
There are increasing concerns that continued economic growth in high-income countries might not be environmentally sustainable, socially beneficial, economically achievable. A Lancet review examines the rapidly evolving field of post-growth research, which has developed in response to these concerns. The central idea of post-growth is to replace the goal of increasing GDP as a means to improve human well-being within planetary boundaries.
Key advances discussed in this Review include: the development of ecological macroeconomic models that test policies for managing without growth; understanding and reducing the growth dependencies that tie social welfare to increasing GDP in the current economy; and characterising the policies and provisioning systems that would allow resource use to be reduced while improving human wellbeing.
Despite recent advances in post-growth research, important questions remain, such as the politics of transition and transformations in the relationship between the Global North and the Global South.
Accountants have the buy-in
Ignore the dire headlines for a moment and look at this survey of 500 CFOs from Kearney and We Don't Have Time, says Alison Taylor. Behind the scenes, companies are finally getting to grips with the strategic challenges underneath the toxic “ESG” discourse. The survey shows that the vast majority of CFOs see a clear need to invest in countering climate change and sustainability more broadly.
Climate justice
Gaia Hasse makes a spirited case: “But let’s be clear: the Global South is not the Global North’s conservation park, preserved at the expense of eternal underdevelopment. I’m fully committed to environmental protection - it’s my life’s work. But I’m equally committed to justice and human rights.
And if you’re from the Global North and truly concerned about nature conservation, consider pressuring your government to scale up climate finance for mitigation, adaptation, and loss & damage, ensuring that those resources actually reach the Global South. Conservation without justice is just another form of extraction.”
We need green regulators
The links between nature loss and risks to people, the financial system, and the environment are becoming increasingly apparent. As essential ecosystems such as the Amazon rainforest and global coral reefs are in danger of collapse and increasing numbers of species are disappearing forever, the living framework on which our economy – and our civilisation – depends is weakening. Are prudential supervisors, central banks, and policymakers, while increasingly acknowledging and considering how to address these nature-related risks to financial stability within their mandates, up to speed?
Disaster capitalism
In 2022, the NY Fed published a provocatively titled report: “How Bad Are Weather Disasters for Banks? Not very.” Their conclusion: Disasters barely dent the profits of large banks. In fact, they often help. “We find that losses at larger banks are barely affected and their income increases significantly with exposure,” the report notes. Lending can jump by 25% or more after a major disaster.
Forget the endless debates about bank systemic risk. The real systemic risk is to homeowners. And it is now unfolding in burned neighborhoods, flooded towns, and shattered homes. The challenge now is to follow the money, expose how banks and insurers profit from disaster, and demand accountability for practices that exploit survivors and future victims. And, given a new twist, ensure that government recovery resources (such as FEMA) do not evaporate into tax cuts for the rich, as Donald Trump proposes.
But all this means paying attention to the little guy. Speak their language. Make the fight for a livable planet everyone’s fight. That’s how you build a movement. That’s how you won: Peter McKillop Founder - Climate & Capital Media.
Fiduciary duty to destroy climate
Lawrence Heim of Practical ESG cites Eric W. Orts – the Guardsmark Professor of Legal Studies & Business Ethics and professor of management at the Wharton School of the University of Pennsylvania, article in Columbia Law School’s Blue Sky Blog last month:
“… there really is a fiduciary duty to destroy the climate when doing so will maximize profits for firms and investors. This means that the leaders of U.S. corporations and institutional investors owe a fiduciary duty to maximize profits through economic activities that continue to produce, sell, and use fossil fuels (i.e., coal, gas, and oil) without considering how to contribute to a global economic transition toward more climate-friendly sources of power (such as solar, wind, hydro, geothermal, and nuclear). In addition, if profits can be maximized by deforestation or the release of methane or other greenhouse gases, then profits must again take precedence.
Is there really a fiduciary duty to destroy the climate? The short answer is yes. As long as profit maximization is the standard for corporate governance and institutional investors, the law of fiduciary duties will continue to contribute to the climate problem.”
The focus of this Climate Change Laws of the World note is why they lost on the fossil fuel claim, but also how the case sets a positive precedent for beneficiaries seeking to uphold directors’ duties, thus it may be instructive for the future wave of litigation against directors complicit in climate damage.
Silver lining
Kaj Embren: As Trump talks up “energy dominance,” the rest of the world accelerates the transition. In Trump’s America, fossil fuels become tools of international leverage, and the clean energy transition gets sidelined. But here’s the paradox: while ESG (Environmental, Social, and Governance) may be politically canceled at home, a new version is quietly taking hold abroad. Call it the real ESG: Economics, Security, and Geopolitics.
By tying fossil fuel policy to a turbulent foreign agenda, Trump may unintentionally do more to accelerate the global shift to clean energy than he intends. Because outside the U.S., countries are watching—and doubling down on energy resilience, renewables, and climate-aligned strategies.
In conclusion
Our lifestyles are supported and nurtured by services & manufacturing that contribute to the fragility of Earth's systems, and these in turn breach planetary boundaries. The resultant tipping points will not only strand our assets but also render the money pipelines redundant. While many seem to agree with this, yet continue to rely on laws and regulations that speed our progression in that direction. Redeploying resources and reconfiguring financial pipelines is all it will take to give ourselves one more chance to avoid indebting future generations.
In her book, The Value Of A Whale, Adrienne Buller examines the fatal biases that have shaped the response of our governing institutions to climate and environmental breakdown, and asks: Are the 'solutions' being proposed really solutions? Tracing the intricate connections between financial power, economic injustice, and ecological crisis, she exposes the myopic economism and market-centric thinking presently undermining a future where all life can flourish.
We seem to be in a bind where we are simultaneously contributing to and exacerbating climate breakdown, while pretending to address it. The Anglo-Saxon system, which has gifted us a fragmented world on the verge of an existential crisis, has room for shifting gears and moving towards an ecological civilisation. However, we could be running out of time.
The International Court of Justice just delivered a stunning verdict. However, like the Paris Agreement, does it have teeth? Once again, we have ended up in Europe, where it all started—colonialism to capitalism, to climate breakdown. Despite science and all the tools at our disposal, we struggle to put the genie back in the bottle. That is because it is neither a paradox nor a conundrum. It is an oxymoron blocking our path!
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
