There's a 'New Abnormal.' Here's Where Banks Come In

San Francisco Fed warns of financial risks that could come into play due to global warming
By Jenn Gidman,  Newser Staff
Posted Oct 18, 2019 11:05 AM CDT
'Dire Accounting' of Climate Change Turns Focus to Money
Stock photo.   (Getty Images/RoschetzkyIstockPhoto)

Greta Thunberg has warned about the environmental perils of climate change. Now, bank regulators are sending up the red flag on possible financial consequences. The warnings come courtesy of the Federal Reserve Bank of San Francisco, which put out a series of 19 papers, compiled by more than three dozen outside experts, that the New York Times calls "one of the most specific and dire accountings of the dangers posed to businesses and communities in the United States." In a foreword, the head of the San Francisco Fed's community development division calls on banks and other firms with a hand in local improvements to "take a leadership role in preparing vulnerable regions most at risk for a 'new abnormal,' which the Times says has already arrived.

Among the ways drastic financial measures could emerge: Banks could turn away borrowers in flood-prone areas, and property values could plummet. That latter consequence could also have a ripple effect in poor communities, since as the value of real estate drops, so, too, does the tax base—meaning funds for flood-prevention initiatives could dry up. The researchers' suggestion? Offer incentives to banks and businesses trying to fend off flood disasters in communities. It's not the first time the San Francisco Fed has gotten tough on this topic, which has become increasingly polarizing: In March, the branch put out a letter in which it noted "the volatility induced by climate change and the efforts to adapt to new conditions and to limit or mitigate climate change are ... increasingly relevant considerations." (More climate change stories.)

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