Monica Palmeira

Climate Finance Strategist

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As more and more areas in the country face intensifying climate risks–like wildfires, extreme heat, and destructive weather events–banks and insurance companies must begin to consider climate-related financial risks.

However, we’re seeing early warning signs that financial institutions are beginning to increase prices or withdraw services altogether from regions they perceive to be at high environmental risk. This emerging phenomenon in the financial services industry is known as bluelining.

Like redlining, bluelining disproportionately impacts communities of color and low-income communities that are more likely to live in these areas due to historic redlining, discrimination, and disinvestment.

Bluelining: Climate Financial Discrimination on the Horizon analyzes emerging bluelining trends in the financial services industry. Although the impacts of bluelining are climate-based, historical lack of access to safe and affordable housing, little to no credit or wealth to fall back on in case of emergencies, and disproportionate insurance costs are systemic obstacles these same communities continue to face.

Policy Gaps and Recommendations:

The report outlines existing policy gaps and recommendations including: : 

Build understanding: Policymakers and regulators must take active steps to understand what bluelining is, its impact, and how to address it 

  • We don’t yet have sufficient data on the emergence of bluelining and its potential impacts. Lawmakers and regulators need more in-depth research and analysis to understand how bluelining is unfolding across credit, mortgage, and insurance markets.
  • Increase transparency into how financial institutions consider climate in their underwriting processes.

Make financial institutions part of the solution: Policymakers and Regulators must enlist the support of financial institutions to mitigate the root causes of bluelining

  • Financial institutions should leverage the Community Reinvestment Act (CRA) and the Inflation Reduction Act’s Greenhouse Gas Reduction Fund (GGRF) to the maximum extent possible to maintain proactive investment in climate resilience measures in low-income communities and communities of color vulnerable to climate change impacts.
  • Financial institutions should financially support and actively participate in community engagement efforts related to climate risk, community impact, and the creation of just solutions.
  • Financial institutions should offer opportunities to safeguard homes in exchange for more affordable access to products and services, including premium and/or interest rate relief.

Improve accountability: Policymakers and Regulators must leverage existing accountability mechanisms and establish new ones as needed to eliminate the practice of bluelining

  • Lawmakers and regulators should intervene to standardize climate risk modeling practices to avoid greenwashing, maladaptation, and disparate impact on low-income communities and communities of color.
  • Regulators should provide specific guidance to smaller financial institutions and Minority Depository Institutions (MDIs) in order to balance climate-related financial risk and harms from intentional or unintentional bluelining practices.
  • In alignment with Affirmatively Furthering Fair Housing, local jurisdictions should evaluate potential bluelining trends as part of Fair Housing Equity Plans submitted to the Department of Housing and Urban Development. 
  • Regulators should utilize the Equal Credit Opportunity Act, the Fair Housing Act, and the Community Reinvestment Act examination process as enforcement mechanisms to hold financial institutions accountable for bluelining.

Monica Palmeira

Climate Finance Strategist