The Big Story
Climate change’s impact on insurance companies is putting the U.S. in danger of a financial meltdown, Sen. Sheldon Whitehouse (D-R.I) told The Hill.
© Miguel J. Rodriguez Carrillo / AFP via Getty Images
The Hill reported earlier this month on how opaque decisions within the insurance industry were laying the groundwork for where Americans will live as the planet heats.
But the risk goes beyond that, many experts warn: The complex interrelationships between insurance, mortgage lending and the broader financial system have made climate change “an emerging risk to financial stability,” according to the 2023 report by the Financial Stability Oversight Committee.
Senate Budget Committee Chair Sheldon Whitehouse (D-R.I.) has been a principal voice warning of the financial risks spilling over as climate change impacts the insurance industry.
Sen. Whitehouse sat down with The Hill to discuss why he worries climate change poses risk to the global financial system and the role of the Senate in addressing it.
Q: Some experts warn about the potential of Great Recession-style systemic risk from climate insurance — but others argue that, however serious that risk might be, it’s fundamentally a regional issue, restricted to places like Florida. Which side of that do you come down on?
Whitehouse: There are very significant indicators and it’s going to be big, national, and even global. A number of studies show a very high risk to the world economy from calamities — and insurance is at the heart of that.
The Florida insurance market is more or less circling the drain right now in the way in which Freddie Mac’s chief economist predicted: that with the danger of sea level rise and coastal storm activity, coastal properties become increasingly expensive to insure and then they become uninsurable.
And once they become uninsurable, they become unmortgageable. And once buyers can’t get mortgages for those properties, the values crash — because you’ll now only have cash buyers on the demand side.
And that was predicted by Freddie Mac to produce a systemic nationwide economic shock, akin to or greater than the [2008] mortgage meltdown.
Q: So to push back on that a bit, the mortgage industry would say, even if the Florida coast becomes uninsurable, it’s still a regional problem — however serious it might be.
Whitehouse. The problem with that is that the sea levels and storm risk aren’t just increasing in Florida.
You’re seeing it through South Texas. You’re seeing it in the Louisiana and Atlantic coast. Florida is getting first and worst because it has so much coast and a sketchy insurance market. But Florida would just be the leading edge of a problem that would hit coasts all around the United States.
And you now have [flooding’s] evil twin, wildfire risk. Once you get away from the coast and out particularly to the west and to areas where wildfire risk is no longer either temporally or geographically predictable.
Q: For the Senate Budget Committee — what legislative intervention could help defray some of that risk?
Whitehouse: I mean, obviously, solving the climate problem would put a huge amount of this risk out under better control.
When we’re looking at federal debt, a third of it — a whole third — was produced by unexpected shocks, like [the mortgage crisis of] 2008, and by COVID.
And there’s every reason to believe that the shock of an insurance and property values crash from coastal and wildfire risk would be worse than those.
The thing about these climate [risks], is that unlike 2008 — where there’s panic and economic crash, the bottom falls out of markets, but then the values return. [But] if the underlying risk is that the property is going to be underwater, or that the house is going to burn four or five times during the course of a 30-year mortgage, then that [risk] that doesn’t go away. So there isn’t a rebound.
That’s what makes it so dangerous.
Welcome to The Hill’s Sustainability newsletter, I’m Saul Elbein — every week we follow the latest moves in the growing battle over sustainability in the U.S. and around the world.
Did someone forward you this newsletter? Subscribe here.
Essential Reads
Latest news impacting sustainability this week and beyond:
The impacts of toxic ‘forever chemicals’ aren’t the same for women, men
This story is part of a series, “Fighting ‘Forever Chemicals’: Women face pervasive PFAS risks.” While “forever chemicals” have been linked to numerous adverse health impacts from cancers to kidney disease, they also may have disparate impacts on male and female bodies. “Very often you see something in one sex and not the other sex,” said Linda Birnbaum, former head of the National Institute of Environmental Health …
LA County tries to stop Catalina Island plans to shoot down invasive deer via helicopters
A proposal from California’s Catalina Island to shoot down invasive mule deer via helicopter has met with a scathing response from Los Angeles County leadership. The Catalina Island Conservancy, which manages 88 percent of the unincorporated territory’s land, submitted a plan last August to the Department of Fish and Wildlife to eradicate the population, due to its negative impact on island wildlife. But …
‘Snow deluge’ years on the decline across the US West, thanks to climate change: Study
While climate change is in general increasing the ferocity and frequency of severe weather events, the same effects may not apply to the massive snow dumps that occasionally pummel the U.S. West. The quantity of snow that falls during so-called “snow deluge” years — such as the big 2023 snow season in California — is on the decline, according to a new study, published Monday in the Proceedings for the National Academy …
Ancient ‘Paleo’ diet largely consisted of plants for some hunter-gatherers, study finds
Prehistoric humans are often believed to have largely eaten meat — to the extent that proponents of many modern low-carb diets portray them as closely resembling humans’ “primordial” eating style. But a recent excavation at a cave in Taforalt, Morocco, complicates this picture, according to findings published Monday in Nature Ecology & Evolution. These findings challenge “the prevailing notion” that …
Climate Money
© AP Photo/Jae C. Hong
Big tech companies are giving up workers’ 401(k) gains to subsidize the fossil fuel industry, a new report alleges.
While companies like Google, Microsoft, Amazon and Apple all have promoted their ambitious plans to cut waste and carbon emissions, the companies’ pension plans continue to invest in fossil fuel companies.
These “financed emissions” aren’t just counteracting companies’ climate goals — they’re also costing workers money, according to the report by activist group As You Sow, which pushes for greater corporate social responsibility.
Recent reporting suggests that at least $1 trillion — and as much as $11 trillion — of fossil fuel assets could be worthless within a few decades, and fossil fuel stocks have for the past decade underperformed the S&P 500.
By investing in index funds that include fossil fuels, Big Tech companies have cost their employees a total of $5 billion, As You Sow found.
On the individual level, that means hundreds of dollars in foregone losses per year. At the top three companies, the difference in actual earnings versus non-fossil fuel earnings were:
“We know fossil fuels have underperformed over the last decade, so the results shouldn’t be surprising,” said As You Sow CEO Andrew Behar.
“What’s surprising is that nearly every retirement plan is invested in the extractive economy, which runs counter to the values of the people who earn the money while reducing their retirement savings.”
The solution, he said, is “very simple” — big tech companies need to ask their asset managers, like Vanguard and BlackRock, to offer a plan for how to divest these employee retirement plans from fossil fuels.
On Our Radar
Upcoming news themes and events we’re watching:
In Other News
Branch out with different reads from The Hill:
Manchin vows to introduce resolution to overturn Biden permitting rule
Senate Energy Committee Chair Joe Manchin (D-W.Va.) said he will lead a Congressional Review Act (CRA) resolution to undo the Biden administration’s final rule on permitting announced Tuesday morning.
Senate, House Dems: Oil companies pivoted from climate denial to ‘deception, disinformation, and doublespeak’
Major oil companies have internally conceded their public vows to reduce planet-warming emissions are incompatible with their business plans, according to a three-year report issued by Democrats on the Senate Budget Committee and the House Oversight Committee.
Around The Nation
Local and state headlines on sustainability issues:
What We’re Reading
Sustainability news we’ve flagged from other outlets:
What Others are Reading
More stories on The Hill right now:
Amazon debuts grocery delivery program for Prime members, SNAP recipients
Amazon unveiled its new grocery delivery program, which is open to Prime members and recipients of the Supplemental Nutrition Assistance Program. Read more
Medical miracle: Denver child’s heart beats again after 14 hours
The recovery story of Cartier McDaniel is nothing short of amazing. At just 4 years old, his heart stopped beating for 14 hours — and then all of a sudden, it restarted. Read more
What People Think
Opinions related to sustainability submitted to The Hill:
You’re all caught up. See you next week!
Check out The Hill’s Sustainability page for the latest coverage.
Like this newsletter? Take a moment to view our other topical products here 📩
If you believe this has been sent to you in error, please safely unsubscribe.
Thank you for signing up!
Subscribe to more newsletters here
Copyright 2024 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
THE HILL 1625 K STREET, NW SUITE 900 WASHINGTON DC 20006 | 202-628-8500 TEL | 202-628-8503 FAX
© 1998 – 2024 Nexstar Media Inc. | All Rights Reserved.