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CLIMATE CHANGE IS GOING TO TRANSFORM WHERE AND HOW WE BUILD

by John D. Macomber

As fires, floods, and droughts increasingly threaten homes, businesses, and other institutions, climate risk has become a financial risk. A National Bureau of Economic Research paper recently concluded that mortgages written on homes in exposed locations are being shed by banks and absorbed by Fannie Mae and Freddie Mac, government-backed mortgage guarantors.1 This implies that homeowners and investors have been making location decisions without properly pricing the cost of potential peril, and that the government has been enabling the oversight. Some are even warning that this market failure could lead to a repeat of the 2008 financial crisis, which was also ...

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