Luca Bertalot, secretary general of the European Covered Bond Council, believes that economic productivity will be threatened if people cannot obtain housing that protects them from the worst effects of climate change. In the event of a heatwave, he notes, worker productivity decreases, which has a negative impact on GDP. Conversely, he speaks of a sort of butterfly effect of energy renovation. If people make it cheaper to cool or heat their home, they may save money that they can spend on other things, for example their children’s education, which in turn improves their children’s chances of leading a comfortable life (and perhaps buying a climate). themselves safe) in the future.
But there is perhaps still a certain slowness in recognizing the storm that is coming. Energy efficiency does not help protect properties from the more severe effects of climate change: more severe storms, rising seas, wildfires and flooding. As governments are no longer able to cover the costs of these disasters, lenders and insurers will likely find themselves exposed to risk. The U.S. National Flood Insurance Program, for example, is already buckling under the weight of growing debt.
“As the damage accumulates, it may well be that markets become more efficient and incentives become more effective. [to harden properties] become stronger, because no one saves you anymore,” says Ralf Toumi of Imperial College London, a consultant for insurance companies.
Ultimately, the impacts of climate change on housing will force some to move elsewhere, Burt suggests. Given the irrevocable nature of some scenarios, such as coastal villages potentially being lost to the sea or communities condemned to endless drought, there are some assets that no amount of reinforcement or renovation can ever save. The structural utility of these properties will simply evaporate, like water in a dried-up oasis.
To ease the burden on people most at risk of losing their homes to climate change, affordable loans could one day be targeted to consumers in these areas to help them move to safer places, Burt says. Lenders who do not take this approach and continue to offer mortgages on homes destined to succumb to climate change may soon come to regret this situation. “If you try to prop up these markets,” Burt says, “you’re wasting money after money.”
