Market Forces

What Climate-related Financial Risk Means for Communities: Part 3 – Community Banking

Climate change-driven events—like heat waves, droughts, floods, and fires—cause damage to communities’ and individuals’ health and safety. But these events also threaten the financial well-being of communities across the U.S. through their impact on markets and local economies. These risks are increasingly visible in the housing and mortgage markets. 

In this three-part series, we’ll be breaking down how the climate crisis is creating risk for three key financial systems—and how these risks to the insurance system, the real estate market, and community banking can affect communities. 

Part 3: Climate-related Risks to Community Banking and Credit Unions 

Climate change poses risks to individual banks as well as the entire banking system by damaging banking infrastructure, destroying collateral, and causing borrowers to default on loans. Threats to banks, especially to smaller banks, translate to risks to communities and individual households. Small banks serve local economies, engaging in relationship banking with small businesses and individuals.  Some smaller banks also provide higher interest rates for deposits, more favorable loans than larger banks, and “better overall economic performance for their communities.”   Read More »

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What Climate-related Financial Risk Means for Communities: Part 2 – Housing & Mortgage Markets

Climate change-driven events—like heat waves, droughts, floods, and fires—cause damage to communities’ and individuals’ health and safety. But these events also threaten the financial well-being of communities across the U.S. through their impact on markets and local economies. These risks are increasingly visible in the housing and mortgage markets.

In this three-part series, we’ll be breaking down how the climate crisis is creating risk for three key financial systems—and how these risks to the insurance system, the real estate market, and community banking can affect communities. 

Part 2: Climate-related risks to the housing and mortgage markets 

For many people, their home is their most important financial asset—which is increasingly put at risk by the impacts of climate change.  

While the economic costs of climate-related hazards have been growing, there is mounting concern that housing markets are failing to fully price these risks, creating moral hazard and potentially causing real estate bubbles to develop. Indeed, previous work by EDF researchers has shown that residential properties exposed to flood risk are overvalued by $121–$237 billion.  

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What Climate-related Financial Risk Means for Communities: Part 1 – Insurance

Climate change-driven events—like heat waves, droughts, floods, and fires—cause damage to communities’ and individuals’ health and safety. But these events also threaten the financial well-being of communities across the U.S. through their impact on markets and local economies. Nowhere is this more visible recently than in the property insurance market. 

In this three-part series, we’ll be breaking down how the climate crisis is creating risk for three key financial systems—and how these risks to the insurance system, the real estate market, and community banking can affect communities.

Part 1: Climate-related risks to the property insurance market

Over the last few years, we have witnessed big shifts in property insurance markets. Insurance costs have increased and availability decreased in regions of high risk to climate-driven disasters, driven in-part by the increasing frequency and severity of flooding, hurricanes, and wildfires, increasing development in areas prone to hazard, growing costs of rebuilding, and high costs of reinsurance.

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What policy instrument options are available to address methane emissions from the coal sector?

New EDF Economics Discussion Paper reviews the instrument options available to policy makers to address methane emissions from the coal sector during the coal phase-out. This paper complements previous EDF research focusing on instruments options for methane emissions from the oil and gas sector  Read More »

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Harnessing Community Insurance: Lessons from an Innovative Post-Flood Assistance Program in NYC

New York City, along with the rest of the mid-Atlantic, is seeing more extreme rainfall events that overwhelm local infrastructure and lead to localized, but often severe, flooding. These flash floods can impose myriad costs on residents from lost income when businesses are interrupted to higher commuting costs when transit is flooded to the need to muck out homes and repair flood damage. 

When disasters like this strike, access to funds is crucial for covering immediate expenses. Unfortunately, low- and moderate-income (LMI) households often lack the resources to meet these urgent needs, leading to financial distress that can persist long after the disaster has passed. To help address this, a group of partners crossing sectors designed a learning-pilot that consists of an emergency assistance program, financed by a novel parametric insurance product. The project team has recently published a new report summarizing lessons from this effort. Read the report here.

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A Tale of Two Neighborhoods: Detroit Neighborhoods Show Us How Communities Are Affected Differently by Climate Change

As the effects of climate change continue to unfold, all communities across the U.S. will face a wider range of risks. However, some communities will be more affected by those risks due to greater exposure and limited ability to recover from their effects.  

For two neighboring communities in Detroit, the U.S. Climate Vulnerability Index, a new tool developed by Environmental Defense Fund and Texas A&M University in partnership with many others, illustrates how a community’s baseline vulnerability can determine its capacity to address devastating floods, storms, droughts, wildfires and other extreme weather events.  Read More »

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