Federal Reserve Pays Attention To The Climate Crisis For The First Time
As climate change continues to ravage our world and causes billions upon billions of dollars in property damage, the Federal Reserve is finally paying attention to the crisis.
While scientists around the globe have been warning for years about the unfolding crisis, everyone else has been slow to react, including financial institutions.
“Nobody denies that [climate change] is happening, that it’s real, that it is going to have a material effect,” Union of Concerned Scientists policy director Rachel Cleetus told CBS News. “But by and large, there is such inertia in our financial system that this isn’t even on the radar of people. The market is short-sighted. You have a three to five-year horizon.”
Indeed, that time-frame is particularly important in the case of the traditional 30-year mortgage, especially along coastlines that are set to be overtaken by flooding due to sea-level rise caused by melting ice caps.
The insurance industry is already taking action in response to the crisis. But now, so is the Federal Reserve.
Last week, the Federal Reserve Bank of San Francisco hosted a conference on “The Economics of Climate Change” that financial institutions across the United States should take seriously.
Not only should banks be concerned about coastal flooding, they should pay attention to stronger and more frequent wildfires and hurricanes, all of which put long-term mortgages at risk.
“Similar to many areas around the country, we need not look far from here to see the potentially devastating effects of our changing climate,” said Federal Reserve Bank of San Francisco governor Lael Brainard in remarks during the conference. “Less than a hundred miles from here, families have lost their homes and businesses, and entire communities have been devastated by the Kincade fire. Some have described PG&E’s bankruptcy as the first climate change bankruptcy. Some insurers have discontinued policies in fire-prone areas, which, in turn, is changing the costs of homeownership and the risk profiles of previously underwritten mortgages.”
“Just on its own, the large amount of uncertainty regarding climate-related events and policies could hold back investment and economic activity,” Brainard continued. “It is vital for monetary policymakers to understand the nature of climate disturbances to the economy, as well as their likely persistence and breadth, in order to respond effectively. Work to understand the implications of climate-related risks for our economy and financial system is at an early stage.”
The problem is that such work may already be too late, giving the financial system less time to prepare for major blows that will have a negative impact on the economy overall.
The Federal Reserve along with other major financial institutions should have to focus on the climate crisis and doing something about it decades ago, but they have ignored the science to please anti-science lawmakers and to pander to the fossil fuel industry that has known their activities are the cause of climate change since the 1950s.
But the evidence is now impossible to ignore.
“When you put all these pieces together, it becomes pretty clear: climate change is an economic issue we can’t afford to ignore,” San Francisco Federal Reserve Bank President Mary Daly told Yahoo News. “This is not a hypothetical risk of the future…the risks are here, we have to deal with them.”
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