Enhancing climate scenarios using a narrative to consider both direct and indirect impacts
In the context of climate change scenarios and liability-side impacts, the prospect of dietary change – in particular a shift towards plant-based diets – deserves attention from insurers. This article explores the impact that such behaviour might have on mortality over the next few decades, with the potential for material reductions in death rates acting as a prompt for providers to consider including ‘vegan diet adoption’ as a plausible climate risk scenario in their longevity trend risk modelling.
Insurers and reinsurers have spent a significant amount of time and effort investigating the potential impact of climate change on their business through scenario analysis – driven by regulatory, shareholder and internal stakeholder interest. However, a recent publication from the Institute and Faculty of Actuaries noted that many climate-scenario models in financial services are significantly underestimating climate risk, and that regulatory scenarios – while introducing consistency – may also bring about group-think, and the risk that analysis outcomes being taken too literally and out of context [1].
To date, most life insurers’ climate change investigations have focused on the impact of physical and transitional risks on asset portfolios. Recently, an increasing number have turned their attention to the liability side of their balance sheets – considering how variations in climate may affect mortality, for example.
The development of a narrative can be effective here, through considering the direct and indirect effects of climate change together. It allows complex pathways and interactions to be explored, and scenario users to challenge their preconceptions and improve their understanding of how climate change may affect their business.
Here, we present findings from research and modelling of one such narrative: how the adoption of plant-based diets – one possible behaviour change made to combat climate change – could affect UK mortality. At present, one quarter of the UK public describe themselves as “still eating but cutting down on meat, dairy and animal products” which reflects a growing ‘flexitarianism’ movement. Of the remaining members of the public, 5% identify as vegetarian, 3% as pescatarian and 2% as vegan [2].
In recent years, scientists, organisations and the public have increased their focus on the environmental impact of diet. There is evidence to suggest that plant-based diets can mitigate the effects of climate change, so we might expect the number of people adopting such diets to increase as a result of social, political and economic factors, including:
In practice, resistance to behavioural change may come both from governments prioritising short-term policy and optics, and individuals being reluctant to change their habits of believing that they have little global impact. We do not assess the likelihood of the particular scenarios set out, only the corresponding mortality impact conditional on their occurrence.
As set out below, there is evidence suggesting that the adoption of plant-based diets can help to mitigate the effects of climate change, so we may expect the number of people adopting such diets to increase under different transition scenarios.
The Intergovernmental Panel on Climate Change (“IPCC”) investigated the ‘greenhouse gas mitigation potential’– that is, by how much such emissions would reduce – of various diets. Adoption of a diet which avoids all food sourced from animals leads to the greatest mitigation potential (~8GtCO2-eq/year) by a considerable margin, followed by vegetarian (~6GtCO2-eq/year) and flexitarian (~5GtCO2-eq/year) diets. Not only do emissions reduce simply due to a reduced dependence on animal-sourced foods, but additionally through carbon sequestration from the changing use of land (e.g. farmland being repurposed to create woodland, grassland, wetland or meadows) [3].
There are several areas of consumption through which adherence to a plant-based diet may have a tangible health effect. These include protein consumption, calorie intake, ultra-processed food and red meat consumption.
Research indicates that greater consumption of animal protein is associated with higher all-cause mortality and cardiovascular diseases mortality. These relationships are more pronounced in individuals classified as having at least one other lifestyle risk factor from the following: smoking, heavy alcohol drinking, overweight/obesity, and physical inactivity[4]. The association is inverted in the case of protein derived from plants[4] [5] [6] [7], suggesting that the adoption of diets which provide protein from plants (as opposed to animals) may lead to increased longevity.
The average daily calorie intake in the UK is around 3,300kcals per day, well above the NHS-recommended intakes of 2,500 and 2,000 for males and females respectively[8] [9]. Individuals who are obese (with a body mass index of at least 30) have an increased risk of type 2 diabetes, heart disease, certain cancers and depression [10]. Compared to meat-eaters, vegetarians consume an average of 10-20% fewer calories[11] [12]. Of course, it cannot be said with certainty that a reduced calorie intake necessarily follows the elimination of meat from one’s diet, though it is reasonable to assume that most vegetarians and vegans did at one point consume meat (and thus ‘went through’ this calorie change).
Ultra-processed foods (“UPFs”) are “formulations of ingredients, mostly of exclusive industrial use, that result from a series of industrial processes”[13]. They include ice-cream, margarine, processed meat such as sausages, and ultra-processed plant-based meat alternatives. Increased consumption of UPFs is correlated with increases in cancers, cardiovascular disease (“CVD”) and depression[14].
The World Health Organization (“WHO”) classifies red meat as “probably carcinogenic to humans” and processed meat as “carcinogenic to humans”[15]. Significant positive association between red meat and mortality from colorectal cancer and cardiovascular disease has been recorded in several studies, and some also indicate a positive relationship between red meat consumption and pancreatic or prostate cancer[16] [17] [18] [19]. However, it is possible that the health-promoting effects of a whole-foods plant-based diet (consisting of legumes, grains, fruits, vegetables and nuts) might not be realised if ultra-processes plant-based meat alternatives were preferred instead.
To model the potential health impacts of a transition to plant-based diets, WTW’s driver-based mortality model was used. A driver-based model of mortality (or cause-of death model) considers the response of overall population mortality to changes in the levels of individual drivers of mortality. For this exercise, a set of drivers relating to plant-based diets (for which there is evidence of a potentially material link to mortality) was required. The chosen drivers were:
The relative risks of mortality associated with various levels of total calorie consumption and with the consumption of unprocessed red meat were taken from academic research sources. Coupling these relative risks with projections of how the drivers themselves might continue to change in the short- to medium-term allowed all-cause mortality to be modelled under the various transition scenarios set out below. The relative risk for all-cause mortality in vegans relative to those consuming meat, taken from another source [20], was used to sense check the results.
WTW’s Climate Practice have developed specific transition scenarios, consistent with other regulatory scenarios, that consider the potential actions taken to mitigate climate change over the period 2022-2050. The scenarios were:
Base Scenario: business as usual (“BAU”), with current policies continuing and no further attempt to incentivise further emissions reductions. This scenario sees calorie consumption remain fairly constant to 2050 and a ~10% decrease in red meat consumption by 2030. The proportion of vegans remains steady (a few percent), while the proportion of vegetarians increases from ~10% to 15% by 2030, maintaining this level until 2050.
Scenario 1: Implementation of considerable mitigation strategies, consistent with <2°C of warming compared with pre-industrial levels – Calorie consumption decreases minimally between 2025 and 2050 (with a maximum reduction of ~10% by 2040). Red meat consumption falls by >65% by 2050. The proportion of vegans increases (at a slowly decreasing rate), reaching ~50% of the population by 2050.
Scenario 2: Implementation of very material mitigation strategies, consistent with <1.5°C of warming compared with pre-industrial levels – Calorie consumption decreases by 15% to 20% by 2050 compared with 2025 levels, with red meat consumption decreasing by ~75%. The proportion of vegans increases (at a decreasing rate), reaching 70% by 2050.
Scenario 3: Minimal initial action, followed by accelerated mitigation from 2030 onwards to stay below 2°C of warming compared with pre-industrial levels – Calorie consumption decreases by 20-25% by 2050. The reduction in red meat consumption is ~80%, and the proportion of vegans reaches >70% by 2050.
Given the high carbon intensity of products from cows and sheep, it is assumed that their consumption decreases significantly under scenarios 1, 2 & 3. Consumption of other animal products is also assumed to decline, though to a lesser extent. Some 40-50% of beef originates from dairy systems, meaning that a reduction in beef production below a certain threshold requires a reduction in dairy production as well [21] [22].
The scenarios see increased consumption of nuts, seeds, beans and lentils, as well as ‘alternative proteins’ from plant-based meat equivalents (e.g., soy or pea protein) and products from precision fermentation and animal cell-based technologies.
The projected consumption of red meat and calories under each scenario, along with the relative risks outlined above, were used to calculate changes in all-cause mortality relative to the BAU scenario by 2050. The changes in mortality by 2050 ranged from approximately 10% to 20% depending on the scenario. Full results and sensitivities are detailed in the seventh issue of our Mortality & Morbidity Bulletin (subscription details available on request).
In considering any narrative-based scenario analysis, it is also important to consider any potential limitations in the analysis. For example, in this case, these projections are age-independent. It is plausible that the impact would reduce at higher ages for two main reasons:
In addition, there are some factors which may be expected to impact future mortality relating to changing diets but were not included in our modelling. These could be included in future refinements of the scenarios as further evidence arises:
Some believe mass adoption of plant-based diets is necessary if climate change impacts are to be mitigated. Our modelling suggests that mortality rates could decrease materially through nationwide dietary change in the coming decades. Of course, mortality rates will be affected by a range of factors, which may act to offset or increase the magnitude of this reduction, and the scientific evidence relating to the impact of diet on mortality is likely to evolve in future. Actuaries may consider ‘plant-based diet adoption’ as a plausible climate risk scenario for longevity trend risk modelling.
The methodology used in considering plant-based diets enables insurers and financial services companies to more broadly consider the impact of climate change on their liabilities. They can assess the quantitative impact of climate change on liabilities under recognised different transition scenarios, which they can then combine with existing asset modelling in the same scenarios. Users of the scenario will be able to assess the relevance and materiality of climate change risk on both side of the balance sheet, giving them a more complete understanding of how climate change impacts their business.
We have developed this approach to climate scenario analysis on the liability side by combining our deep life insurance expertise within WTW’s Insurance Consulting and Technology team with the climate expertise and capabilities of WTW’s Climate Practice. We have worked with (re)insurance clients to develop narratives based on their specific policyholder portfolios and risk profile. Contact Niamh Carr or Sarah Campbell if you would like to discuss how we can support you in enhancing your climate scenario analysis.
WTW’s Climate Practice can help you quantify, mitigate and transfer climate-related risks most effectively. The Climate Practice combines sophisticated risk and analytics capabilities with extensive climate expertise. Our team of specialists is dedicated to strengthening your organisation’s resilience against the financial impacts of an evolving climate and the transition to a low-carbon economy, unlocking your opportunities for future growth. Should you wish to discuss what the Climate Practice can offer you, do not hesitate to contact the team at Climate team.
The analysis and results outlined here represent a subset of the level of detailed content provided to subscribers of our Mortality & Morbidity Bulletin. This investigation into plant-based diets was just one of five topics explored in our seventh issue of the Bulletin: a publication aiming to improve understanding of current and future mortality and morbidity rates through thought-leadership. Contact Matthew Edwards or Richard Marshall to discuss the value that a subscription to our Mortality & Morbidity Bulletin can bring to you and your stakeholders.
