Climate change is a growing threat to household financial security — we need to prepare 

A powerful tornado recently ripped through the towns of Rolling Fork and Silver City, Mississippi devastating already vulnerable, lower-income communities. One family  who survived the destruction lives in a one-story home and are not sure how they are going to be able to make ends meet, having lost their vehicle in the thunderstorm, and suddenly unable to get to work. This Earth Day, with the larger systemic questions of climate change increasingly on the agenda, we cannot lose sight of these individual families who are doing their best every day to weather their respective storms.  

According to NASA, the past nine years have been the warmest since the advent of modern recordkeeping in 1880. Our warming planet is causing significant disruptions to our daily lives, in the form of floods, wildfires, extreme heat, and other increasingly extreme climate impacts.  At the same time steeply rising costs of basic living expenses, and inequity and inconsistencies across public and private benefit systems have left many American households financially unprepared to weather even a modest disruption, such as an unplanned medical or vehicle bill, much less the massive economic upheaval that climate change is already beginning to unleash on our lives. Fewer than half of American adults — 47 percent — possess the necessary savings to cover even three months of living expenses in the event of a job loss, sickness, or another one of life’s unexplainable curveballs.  

Experts in the respective fields of climate and household financial security often explore these issues in isolation, rarely considering where, how and when these twin threats may overlap. And yet, clearly, they do. Nearly a third of the nation’s housing stock — roughly 35 million homes — are “exposed to high risk from natural disasters,” according to research by the real estate researcher CoreLogic, a number that is likely to climb in step with the planet’s rising temperatures. 

There is a myriad of other ways in which climate change threatens household financial wellbeing. In the short-term, natural disasters produce enormous financial “shocks,” unplanned and unavoidable expenses that must be dealt with in the moment, which can destroy a financially-vulnerable household’s tenuous financial footing. In the context of climate change, such shocks are likely to be financially devastating due to the sheer enormity of natural disasters — the sudden loss of a home due to a wildfire, for example, can be very challenging to recover from and some families lack access to recovery resources, increasing the number of communities permanently displaced in the aftermath of extreme events.  

There can be equally financially destabilizing long-term impacts, too. Natural disasters, such as the Mississippi tornadoes, can disrupt supply chains, which can in turn increase the costs of food, medicine, and other basic necessities. In the United States, the price of a dozen eggs has doubled in the past two years after nearly 40 years of stable prices, thanks in part to a global outbreak of an especially deadly strain of the avian flu. Natural disasters can also necessitate costly household relocations, long-term medical needs in the event of a serious illness or injury, or the complete erasure of livelihoods, e.g., farming in certain environments. 

While neither short- nor long-term financial disruptions are unique to climate change, neither have been considered specifically in this context. At the Aspen Institute Financial Security Program, we are confident in our framework for building and sustaining the sort of household financial stability and resilience that leads to intergenerational security. We have a good sense of the financial policies, practices, products and services needed to produce not only a healthy household ledger but also a real chance at creating and maintaining household wealth over the long term. The goal of resilience can be for households to be in better condition on the other side of disaster than they were before. Meanwhile, at the Aspen Institute Energy and Environment program, we are confident in the cataloging of climate impacts and its solutions-oriented approaches to addressing these pillars. What we don’t know is what happens when we overlay climate change on that financial resilience framework and how best to deploy solutions that will address both. 

We also need to look at equity issues, with research showing that significantly more aid from the Federal Emergency Management Agency (FEMA) reaches white people and communities than their Black counterparts. Further, in some instances, white people in counties with significant disaster-related damage increased their personal wealth in the years after the disaster while Black families lost wealth. These disparities are potentially attributable to a range of factors that directly connect to household financial wellbeing — property values, access to mainstream financial institutions, and whether the municipality generates enough tax revenue to pay the local share of the aid as required by FEMA. Furthermore, these disparities are at risk of being exacerbated by increasing climate impacts. 

Those of us who work on household financial security, and those of us who work on climate change, need to unite our respective networks and expertise to create a new agenda around household resiliency. We must ensure that all households — not just those who are white or have more financial resources — are able to better recover from natural disasters. We have to consider these issues together if we want financially vulnerable households to have a real chance at creating and preserving wealth over the long term.  

Joanna Smith-Ramani is co-executive director of the Aspen Institute Financial Security Program and co-authored by Greg Gershuny, executive director of the Aspen Institute Energy and Environment Program (EEP).