Monica Palmeira

Climate Finance Strategist

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As the frequency and intensity of climate disasters increases nationwide, low-income communities and communities of color are not just facing rising temperatures and worsening storms, but the growing threat of financial exclusion.

Bluelining is a discriminatory practice where financial institutions–like insurers, banks, and mortgage lenders–increase prices or withdraw services from areas they perceive to be at high risk of climate related impacts. Similar to redlining, which denied communities of color access to essential financial services, bluelining reinforces and deepens existing social and economic inequities. It abandons communities that are often on the frontlines of climate impacts with the least amount of resources, locking them in a cycle of vulnerability and financial isolation.

Our 2023 report Bluelining: Climate Financial Discrimination on the Horizon explores the early signs of bluelining and the potential for financial exclusion that deepens existing inequities to become systemic. A year later, Wake up Call: A Community Case Study on Emerging Bluelining Practices builds on the 2023 findings, through an assessment of lending practices across 18 metropolitan regions in the U.S. facing climate risk. The report includes a detailed case study on the community of Bucksport in Horry County, South Carolina, and its implications for vulnerable communities facing the dual threats of climate change and historical disinvestment.

The report highlights a disturbing lack of data on how financial institutions are making underwriting decisions that may be bluelining communities out of access to financial resources.

Policy Recommendations

The report identifies eight policy recommendations for federal, state, and local lawmakers, as well as financial regulators, to proactively address the root causes of bluelining and protect vulnerable communities.

  1. Leverage Existing Authority for Data Transparency 
    • Federal and state regulators must utilize their authority to publicize insurance data regarding coverage and climate risk
  2. Promote Stronger Requirements for Underwriting Transparency 
    • Lawmakers must pass strong disclosure requirements for financial service providers to ensure transparent decision-making process to aid in determining what parameters lead to bluelining
  3. Vastly Increase Investment in Climate Mitigation and Resiliency 
    • Financial institutions must scale up investments in climate mitigation measures and reduce fossil fuel investments to reduce the intensity of the climate crisis. 
    • They should also leverage new incentives to invest in measures that bolster resilience in communities to safeguard the assets at risk and improve outcomes for vulnerable communities 
  4. Properly Incentivize Safeguarding Homes with Premiums and Interest Rates 
    • Regulators and lawmakers should formally require insurance companies to extend premium relief to homeowners in existing homes who can demonstrate specific levels of risk mitigation measures implemented in their homes 
    • Similar requirements should be considered for mortgage lenders and ensuring interest rate calculations that start to consider climate also consider mitigation measures 
  5. Engage in Relocation and Managed Retreat Dialogues 
    • Financial institutions must engage with communities to ensure they’re made aware of how they will be invested in 
  6. Pilot Equitable Property Insurance Strategies 
    • Lawmakers must think innovatively regarding interventions in the property insurance market in order to achieve more equitable outcomes 
  7. Discourage Unsafe Development 
    • Policymakers must make tough calls related to discouraging unmitigated growth while preserving opportunities for affordable living in more climate-safe areas 
  8. Codify Strong Supervisory Guidance for Equitably Addressing Climate Risk 
    • While principles published by the financial regulators offer an initial first step, financial institutions need detailed and nuanced guidance for how to navigate the challenges of balancing climate-related financial risk and responsibilities to serve low-income communities and communities of color.

Monica Palmeira

Climate Finance Strategist

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