May 30, 2016 - 12:00am
The Discussion Paper, There goes the neighbourhood, is the largest review of the financial implications of climate risk to housing in Australia.
Natural hazards that are introduced or exacerbated by climate change include coastal shifts (erosion, storm surge, inundation etc.), riverine flooding, and bushfires. These risks are often poorly understood and communicated to those buying or building property in along Australia.
The paper finds that despite many public policy reviews and recommendations, and several private sector initiatives, policies and industry practices actually encourage the continued development of vulnerable housing in exposed areas.
It also examines the rapidly-evolving role of different forms of data in determining, communicating, and addressing climate impact risks to housing. It highlights that improved capabilities of climate modelling, better topographical data and general improvements in computing power are enabling better risk-profiling at the address-level. However these tools are not necessarily utilised across the private sector, and are often not available to the public.
Joint responsibility for assessing and addressing these risks lies with all levels of government; particularly state and federal. But it is widely recognised that the private sector must also play a role in tackling this complex problem.
There goes the neighbourhood focuses specifically on the financial sector, and finds that efforts to understand the risks themselves and attempts to improve the situation are mixed. Insurers have, broadly speaking, been pro-active at company and industry levels, and via cross-industry initiatives. The banking sector has generally been less engaged.
The paper argues that engagement by banks will benefit both their own individual risk profiles and bring co-benefits of reducing risks to to individual households and to public balance sheets ‒ which can ultimately bear the cost of private losses from natural disasters.
Click below to download the Discussion Paper.