I was once asked this by a friend. “I’d like to buy a vacation home that would stay in my family for several generations. You’re an environmental lawyer, where can I buy a vacation on or near a Jersey Shore beach that won’t be affected by climate change?” My answer was simple. “You probably can’t. Think instead about a home on a hill in the Berkshires.” Sometime later, I shared with him the remarks of a public official in Florida who noted that sea rise was cutting off some waterfront homes from the Intracoastal Waterway because their boats could no longer clear certain bridges and the town lacked the resources to raise them. “Do you think that will affect the mortgageability of those properties?”
My friend thought that the financial impact of climate change was years off. It’s not and, unlike the prior administration in Washington, the current administration knows that and is acting now to address climate change. On May 20, 2021, President Biden signed the Executive Order on Climate-Related Financial Risk. It recognizes that the “intensifying impacts of climate change present physical risk to assets, publicly traded securities, private investments, and companies …” This administration wants the Federal government’s component departments, etc., to “account for and measure” climate change risk “by appropriately prioritizing Federal investments and conducting prudent fiscal management.” The order also requires a Federal strategy regarding “financial needs associated with achieving net-zero greenhouse gas emissions for the U.S. economy no later than 2050 …”
Of course, the impact of this order on our society cannot be fully understood now. However, a Federal mandate to determine the extent of climate-related financial risk, quantify it, and disseminate it publicly is going to affect financial institutions and their customers. It is information that will be factored into lending decisions and therefore, into commercial and personal real estate acquisitions, even if a vacation home is in the Berkshires.