Understanding the Impact of Climate Risk on Workers' Lives and Jobs
This summer season spotlights the reality of the climate crisis and its profound impact on our daily lives. The increasing frequency of extreme weather, wildfires, heatwaves, and floods is a stark reminder of the dangers we face in our homes, at work, and in our communities. These events are not just distant threats– they currently impact workers across various industries - from utilities to consumer goods, retail workers, and finance professionals.
Impact of the Climate Crisis on Workers
Wildfires are estimated to put over $11 billion in property or 3.3 million US households at risk, displacing people from their homes and communities. In California alone, wildfires have caused nearly $18.7 billion in property damage over the last five years, poor air quality, and public health risks. Underpaid firefighters are grappling with overstretched budgets, underscoring the strain these disasters place on essential services and dedicated individuals.
Heatwaves have also caused significant damage, taking an economic toll on the US economy — and, more so, on the health and safety of countless workers and their families. Outdoor workers, such as those at airports, construction sites, and public works, face serious health hazards due to extreme heat. Educators and children are affected by dangerously sweltering conditions in schools. The combination of extreme heat and droughts has also impacted farmers' safety and ability to sustain their livelihoods- they are 35 times more likely than laborers in other industries to die from heat exposure.
Extreme weather events like floods and hurricanes pose significant risks to workers' health, homes, and communities. Throughout the country, increasing rates of extreme weather are making homes unaffordable, uninsurable, or unlivable:
“‘Mr. Langston spent months trying to find another company to insure the townhouses, on a quiet cul-de-sac at the edge of Cedar Rapids, that belong to members of his homeowners association. Without coverage, ‘if we were to have damage that hit all 17 units, we’re looking at bankruptcy for all of us,’ he said… ‘It’s becoming an untenable situation,’ said Sridhar Manyem, senior director of industry research at AM Best, a company that rates the financial strength of insurers.”
New York Times research also found that in the last year alone, "storms, wildfires, and other disasters pushed 2.5 million American adults out of their homes, according to census data, including at least 830,000 people who were displaced for six months or longer."
These devastating effects of the climate crisis on workers' lives and jobs today also jeopardize their hopes for a dignified retirement future by loading their fund investments with unaccounted-for “climate risk”.
Climate Risk and Workers’ Retirement Security
In the finance world, “climate risk” refers to the risk to an individual company’s stability and value as an investment. Retirement savings of any kind - pension plans or managed savings in a defined contribution plan must widen the aperture of risk to account for systemic threats such as climate change. Climate risk can take several forms–
Destruction can happen to facilities, supplies, or resources a company needs because of climate-related disasters like flooding, extreme heat, hurricanes, etc.
The financial hit to a company because of disruption in their ability to function– or the increased cost of being less energy efficient or resilient to the harms of climate change
The bigger picture is total disruption and insecurity in the economy all companies have to work within because of the myriad of ways climate change is destroying so many aspects of our lives—from public infrastructure like transportation, housing, and job stability to collapsing natural environments and, of course, the ability of all communities to have full, active lives.
Climate-related financial risks burden investors, workers’ jobs, retirement security, and local communities and economies.
The Role of Public Pension Funds in Climate Action
But it doesn't have to be this way. And, with over $6.5 trillion in investor power, US public pension funds can play a crucial role in promoting responsible investing practices to protect workers’ retirement savings and support a more sustainable economic future.
Pension funds have the power and tools to drive solutions to the challenges caused by climate change, create safer and more sustainable working environments, and hold companies accountable. Since climate change affects our entire economy and irresponsible corporate actions can impact the financial system, pension boards have a fiduciary responsibility to address systemic climate risk and the inequalities it causes.
So this summer, let’s ask ourselves: What kind of economy do we want to live in, and who should it serve? Let’s make “addressing climate risk” a stage for creating a future where workers’ rights to safe and sustainable working environments are realized, where the retirement future they worked hard for is secure, where racial and economic inequality among workers is shrinking, and where their communities are safer in the face of environmental challenges.
ABOUT CLIMATE FINANCE ACTION
Climate Finance Action (CFA) is a women-led, 501(C)3 non-profit organization equipping stakeholders and decision-makers to leverage the transformative power of publicly-held capital for real-world climate solutions to ensure a just transition to an inclusive economy in favor of people and the planet. With a focus on collaboration, education, and strategic partnerships, CFA has facilitated groundbreaking dialogues, developed comprehensive educational materials, and engaged with numerous stakeholders— educating 8,000+ union leaders and members and advising over 40 state treasurers and pension staff working towards policy reform.
