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Climate Change Poses Financial Threat to U.S. Economy, New Federal Report Says | The Weather Channel

The Weather Channel logoThe Weather Channel 9/10/2020 Jan Wesner Childs

A new federal report warns that climate change is a threat to the U.S. financial market that could have long-term economic impacts.

The document, titled Managing Climate Risk in the U.S. Financial System, was released Wednesday by the Commodity Futures Trading Commission.

The report concluded that the high cost of disasters like wildfires and flooding — made worse by climate change — could affect long-term economic growth.

“As we’ve seen in the past few weeks alone, extreme weather events continue to sweep the nation from the severe wildfires of the West to the devastating Midwest derecho and damaging Gulf Coast hurricanes. This trend — which is increasingly becoming our new normal — will likely continue to worsen in frequency and intensity as a result of a changing climate,” Commissioner Rostin Behnam said in a news release.

“Beyond their physical devastation and tragic loss of human life and livelihood, escalating weather events also pose significant challenges to our financial system and our ability to sustain long-term economic growth.”

(MORE: A Risky Combo: Climate Change and the American Dream)

The report notes that financial markets are unprepared for climate change and makes 53 recommendations aimed at mitigating the economic impacts, including carbon pricing, which puts a monetary value on greenhouse emissions. That can be a tax, for example, that emitters have to pay.

The report's recommendations are nonbinding. The New York Times noted that what might be most significant about the report is that it was published under the Trump administration, which has watered down many environmental policies and walked back some efforts to curb climate change.

“This is the first time a government entity has looked at the impacts of climate change on financial markets in the U.S.," Robert Litterman, the chairman of the panel that produced the report and a founding partner of investment firm Kepos Capital, told the Times. "Rather than saying, ‘What’s the science?’ this is saying, ‘What’s the financial risk?’"

Litterman added: “It was shocking when they asked me to do this. This is members of the entire community involved in financial markets saying with one voice, ‘This is a serious problem, and it has to be addressed.’”

While it may be the first time the government has looked at the financial risk of climate change, businesses like insurance companies and institutions that issue mortgages have already begun to figure it into their matrix.

In a survey of actuaries last year, climate change was listed as the top risk to insurers, and researchers and mortgage experts predict the traditional 30-year mortgage could soon become too risky for lenders in areas where climate change impacts like coastal flooding are already taking hold.

The Weather Company’s primary journalistic mission is to report on breaking weather news, the environment and the importance of science to our lives. This story does not necessarily represent the position of our parent company, IBM.


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