Editor’s note: The shareholder representative nonprofit As You Sow has borne the brunt of the coordinated backlash against corporate and investor action on climate, diversity, and ESG. At stake is the future of fiduciary duty and the understanding of material risks. ImpactAlpha has invited As You Sow CEO Andy Behar to chronicle the action in Fiduciary Future, a series of dispatches from the front lines. Have a reaction, or a dispatch of your own? Drop us a note.
Dozens of tidal gauges from the coast of North Carolina to the tip of Texas show sea levels are six inches higher today than in 2010 – an accelerated change that previously took 50 years. Most remarkable is that this coastal area along the Gulf of Mexico is rising at nearly twice the global average, according to this map recently published by the Washington Post.
Average sea level in Charleston, South Carolina rose seven inches since 2010 – four times faster than the previous 30 years. In Jacksonville, Florida, seas rose six inches in 14 years – 25% of the city’s major roads could soon become inaccessible to emergency vehicles. Residents face flood risks that could triple in coming decades.
Galveston, Texas saw sea level rise of eight inches in 14 years that has been exacerbated by sinking land.
Scientists call this accelerating sea level rise “very abnormal and unprecedented,” as well as “irreversible.”
As is often the case with impacts of climate change, less affluent communities (often of color) are more likely to feel the brunt of environmental injustice as the economic and physical hardships of flooding damage their homes. Families living adjacent to petrochemical plants are also burdened by floods that cause toxic storage ponds to overflow into local communities. In Mobile, Alabama, flatlands allow rising water to travel farther inland, causing even more severe flooding from heavy rain systems that are occurring more frequently and with greater intensity.
In fact, a new LNG plant being built in low-lying Plaquemines Parish on the flood plains of Louisiana is building a 26 foot high seawall that goes 60 feet underground around the 632-acre site. “Sure they may have massive flood walls, but the facility may evolve into becoming an island surrounded by open water,” said Torbjörn E. Törnqvist, a professor at Tulane University’s department of earth and environmental sciences.
Water is also rising around Port Arthur, Texas, a center for oil refineries where oil companies continue to rebuild plants even after previous investments were washed away. This is why our nonprofit, As You Sow, has filed multiple shareholder resolutions asking local oil producers not to rebuild in flood zones after facilities have been destroyed. Sadly, they continue to ignore this obvious material risk to operations at the expense of shareholders and local communities.
In response to historic damage from increasingly frequent floods and sea rise, major insurance carriers have understandably stopped issuing insurance in these suddenly vulnerable zones. Insurance companies understand why Senator Sheldon Whitehouse (D), Rhode Island has been sounding the alarm that climate change could crash the financial system. Indeed, that is the big picture risk that we at As You Sow have been working to prevent for decades.
At the individual level, climate change is already crashing personal finances of American families, especially the millions with the majority of their wealth invested in their family home. How will they sell homes that are uninsurable? In St. Petersburgh, FL residents cannot afford to elevate their homes and without homeowner’s insurance they cannot sell, as it is required for the potential buyer to get a mortgage.
It only gets worse. Experts predict there will be 17 to 25 named storms in Florida, including four to seven that become major hurricanes with winds of at least 111 miles per hour. US flood losses are expected to spike 26% by 2050. Flooding, along with accelerated sea level rise, creates what are now known as “super floods” – normal drainage gets backed up by the higher tides, causing septic systems to overflow, contaminating waterways, and creating serious health conditions for communities already struggling to make ends meet.
Down South, there are super flood zones where people regularly get cut off from essential services, including hospitals and access to food. All that on top of catastrophic hurricanes (see my blog on the need to create a category 6 level of hurricane) and you have a sad new kind of “perfect storm” wreaking havoc on millions of Americans’ net worth.
Dangerous interdependencies between mortgage lending, homeowners’ insurance, and the global financial system were made painfully obvious during the financial meltdown of 2008. A recent Hill article stated, “the Florida insurance market is more or less circling the drain right now.” Rather than address growing climate risk, Florida’s Orwellian Governor Ron DeSantis banned the term climate change.
Senator Whitehouse (D-RI) made the threat clear, “the thing about these climate risks is that unlike 2008 where there’s panic and economic crash, the bottom falls out of the markets, then value returns. If the underlying risk is that the property is going to be underwater…then that risk doesn’t go away so there isn’t a rebound.”
Similarly, insurance companies are withdrawing homeowners’ coverage in Western states due to wildfire risk. Homeowners across the country are now more exposed than ever due to rising risks from climate change, unable to count on building wealth from their homes for retirement or for their children.
From the personal, community, and overall economic perspective, the catastrophic financial risk of climate change should not be underestimated. As Americans are abandoned by insurers, and elected representatives continue to willfully ignore the underlying problem to please donors in the fossil fuel industry, it is only a matter of time before their constituents realize the true costs of climate change.
If we don’t all wake up – as a nation – to climate risk, homeowners will soon literally and financially be underwater.
Andrew Behar is CEO of As You Sow, a non-profit leader in shareholder advocacy. Founded in 1992, As You Sow harnesses shareholder power to create lasting change and align investments with values.
