Including Marginalized Communities in Policy Decisions

Climate change and household financial well-being The increase in climate-related disasters, such as floods, wildfires, and heat waves, has created serious financial burdens on households across the country. Since 1980, the world has seen a fivefold increase in the number of billion-dollar natural disasters. 2018 to 2022 alone saw an estimated $617 billion in damages from climate and weather related events. Beyond the public health and safety concerns, these disasters have hit Americans in the pocketbook. An estimated 13% have reported facing severe economic hardship following such disasters, with this number projected to rise as climate extremes become more frequent. For particularly vulnerable households, high financial costs from disasters can further exacerbate existing inequities. In order to adapt to a changing world of more frequent climate catastrophes, policy makers will need to develop solutions to assist populations in disaster recovery. Solutions to climate-related financial disasterThe impacts of climate-related disasters are numerous. In addition to harming businesses and infrastructure, extreme weather events can lead to worker displacement, job loss, and migration. Catastrophic climate events, known as climate hazards, create financial strain on households from damage done to one’s property. Many households may not have the immediate resources or savings needed to repair the damage, leading to long-term displacement and financial instability. Healthcare costs, transportation expenditures, and inability to access proper insurance coverage are other burdens many individuals face following a natural disaster.Low-income communities will face the brunt of climate change impacts. By understanding the historical inequities that have pushed marginalized communities into regions particularly vulnerable to climate change, policy makers can create more equitable outcomes. Many officials are now encouraging increased access to education, “democratized” climate decision making, and new ways to engage and empower people to take a stance in decisions about the climate. The US Department of the Treasury further suggests that households consider utilizing government incentives to adopt climate-resilient property modifications, such as tax credits and rebates for energy-efficient home improvements. Policymakers further plan to support financial well-being by assisting households in financial resiliency efforts with programs through the Federal Emergency Management Agency (FEMA) and U.S. Small Business Administration (SBA).Advantages of improving financial stability following a climate disasterInitiatives designed to address vulnerable communities affected by climate disasters can assist in adaptation towards climate extremes. Having access to resources, whether political or social, is key to providing impacted communities with the support they need to adapt to a changing environment. With increased educational awareness and government assistance, households facing financial distress and instability following a climate-related event will have the support they need to recover.Setbacks to achieving financial stability In order for these goals to be realized, policy makers will need to overcome significant challenges. For example, many households across the country face underinsurance, as climate extremes become more common and push insurers to raise rates or pull out of the insurance market altogether. As a result, vulnerable regions may be left without the proper resources to recover. A recent report found that policies for 39 million properties (about a quarter of all homes in the US) are under-priced for the climate risk needed to insure those properties. Without insurance coverage, homeowners are unable to fix damaged property.Furthermore, the most severe effects of climate change disproportionately affect socially vulnerable populations. Less than 60% of single-family homeowners living in areas where mandatory flood insurance is required actually have the necessary insurance. As such, policy makers need to pay more attention to those communities most vulnerable to climate change in order to ensure they have access to the insurance needed to recover from a disaster and achieve financial stability following a climate-related event.Dr. Andrew Rumbach, Senior Fellow in the Metropolitan Housing and Communities Policy Center at the Urban Institute, studies household and community risk to natural hazards and climate change. Dr. Rumbach is involved in the policy implementation and research of numerous federal and state-declared disaster events and is on the forefront of addressing disaster vulnerability and environmental risk.ResourcesNBC: Climate change could impose ‘substantial financial costs’ on U.S. household finances, Treasury warnsWorld Bank: Social Dimensions of Climate ChangeUS Treasury: The Impact of Climate Change on American Household FinancesUS Treasury: Fact Sheet: The Impact of Climate Change on American Household FinancesFurther ReadingBBC: Climate change is fuelling the US insurance problemFor a transcript of this episode, please visit https://climatebreak.org/including-marginalized-communities-in-policy-decisions/.