Numerous climate-related weather disasters have pushed our country's smallest banks to the financial brink. Hurricane Milton will add another billion-dollar event to this year's growing list.
What's happening?
There were 28 billion dollar weather and climate disasters in the U.S. last year — the highest yearly total ever. This year is on pace to threaten that record.
Through August, 20 billion-dollar events have occurred. That already nearly matches the average number of billion-dollar disasters for a year recorded over the past five years.
AccuWeather, a private weather company, estimates Hurricane Helene's damage could top $225 billion. Hurricane Milton, the second major hurricane to strike Florida in two weeks, will undoubtedly be another billion-dollar disaster.
First Street, a company that uses climate data to assess the risk for financial institutions from our overheating planet, found 57 U.S. banks that had a combined total of $627 billion in real estate loans could face significant financial risk.
"If you lost, after insurance, 14 or 15% of your residential real estate portfolio or commercial real estate portfolio, there's no way you have the reserves to withstand that, so you're talking about potential bank failure," First Street CEO Matthew Eby said, per Fortune. "Financial institutions are really the big concern because if they fail in financial crises, that impacts everyone else, as opposed to just a company failing by itself. "
Why are potential small-bank failures important?
Scientists have used the analogy of a baseball player increasing his probability of hitting home runs because of steroids to explain what is happening in our warming world. Carbon pollution is supercharging our planet's atmosphere, making it more likely for billion-dollar disasters to occur.
The World Meteorological Organization studied weather disasters from 1970 to 2019. A WMO report found that "the number of disasters has increased by a factor of five over the 50-year period: whereas 711 disasters were recorded for 1970-1979, 3,536 were recorded in 2000-2009."
If this trend continues, more banks will be at risk of financial ruin.
What's being done about billion-dollar weather and climate disasters?
The 2021 Bipartisan Infrastructure Deal has several goals to increase our country's disaster resilience. The legislation also targets the reduction of heat-trapping gases that are exacerbating weather disasters. A study has already been released that identifies climate change as a key driver of Hurricane Helene's devastating power.
Shifting away from dirty energy sources toward renewable options is crucial in reducing the risk of the threat of an increasing number of costly weather disasters. There are several ways we can do our part to help. Doing things like using a reel mower or installing solar panels can make a difference.
Speaking out on climate issues can have a big impact. The more people who spread the word and use their voices to advocate for changes that can help our planet's future, the better.
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