Review Says Climate Change Presents Investment Opportunities for Low- and Moderate-Income Communities

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Review Says Climate Change Presents Investment Opportunities for Low- and Moderate-Income Communities

The Community Development Innovation Review offers so many useful information and strategies to address climate change risk by low to moderate-income communities (LMI) which are detailed within the 160-page document.

It says, “as these communities begin to grapple with a changing environment, strategic investment can increase resiliency and support adaptation while simultaneously advancing community development priorities.” 

The review highlights the leadership role of the community development sector to make smart, and proactive investments in adaptive capacity and resilience to low and moderate-income (LMI) communities that will be disproportionately affected by climate change.

Diverse perspectives from the community, financial, economic, and academic were taken on making these investment opportunities.  

The Review offers a comprehensive discussion of the following climate-related topics that offer investment opportunities:

Climate adaptation and development.

It talks about how a community can both build capacity in managing risks and taking advantage of opportunities that enhances community development.

Flood risk and structural adaptation of markets

It asserts that current flood assessment tools are outdated and cannot measure flood risks accurately and the impacts of hazard mitigation investments. With the frequency of floods in the US and its effects on properties and assets, there is a need to advocate for new and standardised tools to measure flood risks and hazards.

Real estate as a tool for adaptive banking.

“By aligning the performance of loans with long-term property values, Coasean bargaining suggests that banks could be incentivized to subsidize adaptive projects when doing so provides a net benefit to the community”.

This chapter also, discussed how the real estate values are influenced by climate-related risk. For example, properties located in high elevation with no risk for sea-level rise would increase in value over time compared to those properties with an overwhelming exposure to sea-level rise.

Also, when private institutions invest in adaptation measures to protect communities against sea-level rise – especially low-income communities, it can have a positive influence on the long-term values of their properties and so bringing back the benefits to the communities.

Rebuild to fail or rebuild to adapt

“The actual work of designing, planning, and managing climate-adaptive infrastructure takes place primarily after disasters”. In this chapter, it addresses whether the actual implementation of climate adaptation really addresses the needs of climate change adaptation.  To gauge this, the article uses the wildfire risk mitigation models in adaptive reconstruction after climate-related natural disasters.

Insurance innovation and community-based adaptation finance

In this section, it discusses how the governments traditionally act as “insurers of last resort”.  When disaster strikes, it is usually the government, that vulnerable and affected communities turn to.  Over the years, as the number of these disasters increased, the gap between who have insurance and those who don’t have widened as well.

Other climate-related topics that are discussed in the report are the following:

Forest finance unlocks opportunities for Rural Communities

“The Forest Resilience Bond promises to accelerate the pace and scale at which critical work to restore the health and functioning of the nation’s forested landscapes is undertaken. It does so by engaging private capital to cover the upfront cost of activities to improve forest health and by bringing together stakeholders that benefit from this work to share in the cost of reimbursing investors over time.”

You can access the entire review by clicking on the button below:

Citation:

Federal Reserve Bank of San Francisco. 2019. “Strategies to Address Climate Change Risk in Low- and Moderate-Income Communities”. Federal Reserve Bank of San Francisco Community Development Innovation Review 2019-1. Available at https://doi.org/10.24148/cdir2019-01

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