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The pace of global warming has been underestimated, meaning that policymakers and financial institutions are ill–prepared for bigger climate and economic risks than expected, UK actuaries and scientists are warning.
A new report from the UK’s Institute and Faculty of Actuaries (IFoA) and University of Exeter (UofE) warns that global temperatures are accelerating faster than predicted due to a loss of the hidden sunshade effect created by air pollution which has offset around 0.5°C of warming.
“As this pollution is being cleaned up, that protective effect is disappearing, thus contributing to further warming,” the report says, highlighting the impact of shipping regulations in reducing sulphur emissions.
The report – titled Parasol Lost – also noted that recent studies have suggested the planet is more sensitive to greenhouse gases than many models assume, meaning temperatures could rise faster than expected.
“Without action, global warming is now likely to reach 2°C before 2050, a level associated with catastrophic impacts on societies and economies worldwide, with major disruption to water and food systems, migration, and human health,” the report says.
Such a scenario raises the risk of climate-driven inflation, financial shocks, and the withdrawal of insurance from high‑risk areas sooner than many expect. This in turn increases the chance of financial instability and the risk of societal and economic collapse due to the loss of nature’s critical support systems.
“An actuarial review of key climate change assumptions shows we may have seriously underestimated the rate of warming as well as the related economic impacts. Unless we rapidly change course, climate damages will start to impact growth and future prosperity,” said Sandy Trust, lead author of the report and a member of the sustainability board at the Institute and Faculty of Actuaries.
The report notes that the UK’s Climate Financial Risk Forum has suggested a severe climate and nature shock could cause a 15-20% fall in global GDP over five years.
Faith Ward, chief responsible investment officer at Brunel Pension Partnership, a UK local government pension provider, said the report suggested potentially catastrophic losses for savers and investors, and called on regulators to focus back on the climate issue. “The deprioritization of climate is incredibly bad for investors, it’s incredibly bad for society,” she said.
The report’s authors called on governments and financial institutions to shift their mindsets to recognise that humanity is not separate from nature but embedded in it, and to create an emergency action plan.
The report highlights as quick wins efforts to reduce methane emissions and to halt global deforestation. It also suggests supercharging the energy transition, protecting and restoring nature, and more research into technological solutions to reduce warming and mitigate the risk of tipping points.
“Action is required to radically accelerate societal adaptation to a changing climate, supercharge the pace of the energy transition, and remove excess greenhouse gases already in the atmosphere. Economically, it will be overwhelmingly positive to do so,” said David King, founder and chair of the Climate Crisis Advisory Group.
This page was last updated January 15, 2026
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
