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Federal Reserve Bank of San Francisco warns of financial risks due to climate change

As flood zones change, the economy will likely take a hit, bank regulators warn. Photo: Coast Guard

As flood zones change, the economy will likely take a hit, bank regulators warn. Photo: Coast Guard

The Federal Reserve Bank of San Francisco published a series of warnings Thursday about the toll climate change could have on the economy, according to The New York Times.

A collection of 18 papers from outside experts amounts to “one of the most specific and dire accountings of the dangers posed to businesses and communities in the United States — a threat so significant that the nation’s central bank seems increasingly compelled to address it,” according to the Times.

The research, conducted by 38 academics and practitioners and published with the knowledge of the bank’s board of governors, also warns that local governments don’t have the means to deal with the economic risks.

“The associated risks and effects of climate change are relevant considerations for the Federal Reserve,” Ian Galloway, director of the San Francisco Federal Reserve Bank’s Center for Community Development Investments, told the newspaper.

Flood risks were a major concern presented in the research. “Current flood risk assessment tools are too blunt and outdated to accurately measure flood risk and the impact of hazard mitigation investments,” wrote Michael D. Berman in one of the reports. “As the frequency and severity of floods in the U.S. continue to increase due to climate change, the shortcomings of our current tools will be increasingly insufficient to quantify flood risk.”

The gap between who has financial protection in the form of insurance and who does not also has grown, wrote Shalini Vajhala and James Rhodes in another paper.

“As a result, many government agencies have found themselves being expected to act as insurers of first resort,” they said.

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