Strengthening Financial Health for Climate Resilience

To foster climate resilience, it is critical to strengthen financial resilience. In this brief, we explore what households need financially to be climate resilient. In particular, we focus on financially vulnerable households, which are disproportionately composed of people of color and those with low incomes.¹² To understand the barriers and risks that vulnerable families face – and identify the solutions that could support them – we draw on a framework commonly utilized in emergency management. This framework conceptualizes the disaster lifecycle into four phases: mitigation (and adaptation), preparation, response, and recovery.¹³ These phases comprise four key pillars for building household climate and financial resilience.

Mitigation and Adaptation
Families need clear communication and guidance to help them evaluate risks, prioritize appropriately, and take action. Additionally, innovative financing structures and incentives can help lower cost burdens for vulnerable families and spur adoption of climate-friendly solutions. Community ownership models present another option for expanding access to green solutions. 

Preparedness
Households would benefit from tangible, structured guidance that helps them plan ahead. They also need support  to build the critical savings they may need during an emergency, and access to affordable insurance to protect their property. 

Response
Families need immediate and accurate delivery of aid, along with trustworthy guidance that helps them navigate an overwhelming time. Financial institutions also play important roles and need to offer flexibility, adaptability, and rapid availability. For many families, maintaining employment and the income it provides is critical to make ends meet; employers can allow people to retain income by offering flexible remote or leave policies. 

Recovery
Impacted households would benefit from hands-on guidance on how to file claims, access resources, avoid scams, begin longer-term planning, and implement mitigation and adaptation strategies. They also need rapid, hassle-free insurance payouts, access to affordable credit, and flexibility from financial service providers.

As we confront the climate crisis, building climate resilience in families must involve efforts to improve financial security. In looking at the landscape of efforts, many stakeholders are actively investing and engaged in designing new climate resilience solutions that meet the needs of vulnerable households, bringing momentum and energy at a critical moment. Yet there is far more to be done. 

The framework provided here offers a path for building climate resilience against high-profile disasters and smaller, chronic issues alike. People need support at each of the four stages to better understand their susceptibility to climate risks, identify the most impactful adaptations, avoid scams, and set the foundation for a “new normal.” This includes guidance and resources to help households prepare for weather events, and rapid relief in the aftermath of a climate event. Collaboration is key, and we all have an important role to play. We urge leaders across industries to come together to increase financial resilience for the most vulnerable among us.

Supported by the Citi Foundation, Financial Health Frontiers is an ambitious initiative that aims to identify the needs, challenges, and opportunities for the next era of financial health. Guided by an Advisory Council of industry experts, business leaders, policymakers, advocates, and researchers from across the country, the Frontiers initiative asks: What are the trends that will most influence financial health over the next generation? How can we harness them for greater and more equitable financial health? Who is not at the table now but has a critical stake in the financial health movement? 

In our initial publication, “Financial Health Frontiers: Shaping the Future of Financial Health,” we looked back at the evolution of the financial health field over the past 20 years, examined successes and challenges, and explored critical headwinds and tailwinds that will shape financial health in the years to come. Now, we’re unpacking these issues in a series of topical briefs that examine opportunities to increase financial health broadly and equitably. Our first brief, “Financial Health Frontiers: Households Under Financial Pressure,” examined critical turning points for the security of middle-class households. 

Financial Health Frontiers is grateful to the visionary members of its Advisory Council for their input and guidance: