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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To make nature financing more equitable, we must understand how NCS credits are used

This blog was authored by Julia Ilhardt, former High Meadows Fellow, Global Climate Cooperation. It was originally published on EDF’s Climate411 blog channel. Read the full post here

Sun cast over forest, nature

At the end of last year, 196 nations agreed to the historic Global Biodiversity Framework, which includes the goal to protect 30% of land and sea area by 2030. Still, nature is woefully underfinanced, with investments in nature-based solutions needing to double to USD 384 billion per year by 2025, according to UNEP. 

Using crediting to incorporate natural climate solutions (NCS) into carbon markets is one way to generate significant finance for nature while cutting emissions, and it’s gaining public and private sector attention. However, both producing and using credits raises important equity considerations. A new paper from EDF focuses on the issues around use, including how credits may impact the communities surrounding polluting facilities. This blog lays out the framing, key issues, and potential solutions, with more detailed analysis available in the paper. 

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Fueling Research, Advocacy, and Community: Economic Internships at the Environmental Defense Fund

The climate crisis requires not only urgent action, underpinned by a robust framework of proven economic-driven solutions to effectively address its multifaceted challenges. Given the increasing urgency, we need economists at the forefront, conducting rigorous research and informing policy decisions. Recognizing this critical need, the Economics team at EDF is dedicated to nurturing economists who are eager to contribute to the climate fight. 

The Economics team at EDF hosts exceptional interns who make significant contributions to our work. Through internships, we aim to create lasting partnerships with talented individuals who will continue to make a positive impact in the field of economics.  

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Addressing Gaps in Disaster Recovery for South Carolina Households through Inclusive Insurance Models

This blog was authored by Environmental Defense Fund economists, Karina French and Carolyn Kousky. See their report here. 

South Carolina is no stranger to the devastating effects of extreme flooding, with hurricanes like Matthew and Florence leaving a trail of destruction in their wake. As the state faces escalating flood risk due to climate changes and continued building in vulnerable areas, it is crucial to address existing gaps and inequities in disaster recovery. In a new report, we provide a comprehensive review of the current resources available to households for post-disaster economic recovery in South Carolina and explore the extent to which innovative disaster insurance policy designs can fill these gaps and improve equity in recovery.  Read More »

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