Q&A: Climate Adaptation and Resilience from a Community Development Perspective

By Elizabeth Mattiuzzi

Jesse M. Keenan is a Visiting Scholar with the SF Fed’s Community Development department. In this role, he works with the SF Fed to explore climate adaptation investment at the local and regional level. He teaches and conducts research at the Harvard Graduate School of Design in the fields of urban development and climate adaptation. He recently completed a book on climate adaptation finance and investment for the Governor’s Office of Planning and Research for the State of California, which will be published by Routledge this fall, and also published the first peer reviewed evidence of a climate change signal in a real estate market. Elizabeth Mattiuzzi, Senior Researcher in Community Development at the SF Fed, sat down with Jesse to learn more about his work and its connections to the community development field.

Elizabeth Mattiuzzi (EM): Can you explain the concepts of ‘climate adaptation’ and ‘resilience’?

Jesse M. Keenan (JMK): Climate change adaptation is a transdisciplinary field that includes a range of allied disciplines in the natural, applied, and social sciences. Whereas climate mitigation is about limiting greenhouse gas emissions, climate adaptation is about the transitions and transformations that societies, ecosystems and engineered systems make to not only limit the impacts of climate change but also to take advantage of new opportunities. Sometimes that means transitioning to new technology, sometimes it means changing the way we live. Adaptation is fundamentally about a change from one stability domain to another. In the case of economics, businesses have always adapted to new markets and shifting supply chains—a failure to do so means going out of business. However, climate change adds an additional dimension that is operating to create both risk and opportunities for businesses and local economies.

By contrast, if adaptation is about transformation, then resilience is about the elasticity of operations of the status quo. To this end, resilience is an inherently conservative concept that speak to a desire to preserve and stabilize. For communities and small businesses, building resilience functionality is important for maintaining social capital and business continuity, respectively. A single investment or strategy can be viewed through the lens of resilience or adaptation, depending on how one draws the boundaries defining actors, interests and the distribution of costs and benefits. Some investments that are intended to promote the resilience of one population, can often be maladaptive for another population. In this sense, the concepts may be internally conflicting or entirely synergistic depending on your frame of analysis. But, there is one thing that we know—neither resilience nor adaptation should be understood as absolute goods. There are costs to both resilience and adaptation, and that means there are winners and losers along the way.

EM: What is ‘climate gentrification’?

JMK: Climate gentrification is a theory that explains the disruption in property markets and communities stemming from changing consumer preferences based, in part, on a given geography’s exposure and its infrastructural and institutional capacity to adapt to climate change impacts. For example, in Miami, low and moderate income residents residing in high elevation areas are finding themselves increasingly priced out, in part, from increased speculative investment in these higher elevation markets that are anticipated to be superior investments in the long term when compared to lower elevation areas that are already experiencing nuisance flooding. However, this may also play out in a variety of geographies exposed to forest fires, water shortages, or landslides that are being driven in their frequency and/or intensity by climate change impacts.

There are three pathways by which climate gentrification may manifest. The first pathway is the Superior Investment Pathway. In this case, people move—and shift their investment—away from a zone of high exposure and low resilience to an area of low exposure and high resilience, as described in the Miami example. The second pathway is the Cost Burden Pathway. Here, you can have something like inverse gentrification—where the cost burden of living in a vulnerable area is so high that it drives people out. For example, the costs from rising insurance bills, increased taxes, and an overall loss of economic productivity collectively operate to force people of lesser means out. Eventually, only the wealthy can afford to live—or rebuild—in these high exposure areas. The third pathway is the Resilience Investment Pathway. This pathway runs counter to the dominant narrative in which people think of resilience as an absolute good without realizing that there are always trade-offs. In this pathway, resilience investments operate to increase the value of a particular market or sub-market to such an extent that it increases the area’s desirability and rents go up. This is an unintended consequence of resilience that has actually operated to drive out the very people that the investments were intended to protect. It forces us to question and think carefully about who pays and who benefits from resilience investments. Given local government’s bias to preserve a tax base, these issues will be increasingly exacerbated as we make more public and private investments in resilience, adaptation, and hazard risk reduction.

EM: How do these issues apply here in the 12th District of the Federal Reserve System?

JMK: The 12th District is one of the most diverse social, economic, and ecological landscapes in the world. Climate change represents not simply a challenge in terms of extreme events, it also represents a challenge to our social welfare, public health, and our pocketbooks. For instance, our research has shown that it is already impacting the value of people’s largest single investment—their home. For example, wells are running dry in California’s Central Valley. This is a combination of overconsumption and a long-term structural drought that is partially attributable in its intensity and duration to climate change. The bottom line is that areas with less sustainable access to water will be worth less. That is going to shift populations and land values, if it isn’t already. We are already seeing this in the Central Valley. If you don’t have potable water at your house, your house can be condemned. A condemnation proceeding is grounds for defaulting on your mortgage, which is grounds for a foreclosure. How many people have been foreclosed from their homes and are now homeless because their well has run dry? No one has ever sufficiently researched this, but I suspect it is more than we care to admit. 

Climate change is not simply about managing one disaster to the next, it is also about adapting to the ongoing stresses that impact our economies. The impacts of climate change are already being felt on commodities and production, from reduced hours for laborers building homes to declining fisheries yields from shifting habitat ranges. From a community investment point of view, climate change is anticipated to either shrink our supply of serviceable land or otherwise impose costs that operate to diminish our housing capacity and economic output. In this sense, we can’t think about climate change in isolation in terms of its physical impact on the environment—we have to relate it to transportation, housing, economic mobility, and healthcare. We can’t disaggregate these facets of our daily lives. In fact, adaptation and resilience investment often offer a variety of co-benefits that not only increase our social welfare but also offer viable economic returns based on solid business models. Banks and lending institutions have a critical role to play in investing in housing, infrastructure, and small businesses that reduce our risk and take advantage of new opportunities arising from climate change.

EM: What are the challenges and opportunities for the community development field in the area of climate adaptation?

JMK: The community development sector is already on the frontlines addressing some of society’s most important challenges. With a few exceptions for things like environmental justice, there has been little attention paid to how environmental challenges impact people’s daily lives. Those considerations were either relegated to environmental conservation groups or were otherwise taken for granted given more pressing priorities for shelter and public health. Yet, climate change represents an existential threat that is operating to subvert community investments that were intended to serve future generations. 

Today, we have made significant empirical advances in understanding the interconnectivity between our environment and our quality of life. We are able to measure outcomes and connect those dots in ways that allow us to rationalize a whole new set of values that support new investments and new asset classes. Community development investors are challenged to not only mainstream climate considerations into existing investment models but they also have the opportunity to create new asset classes and products that are required to capture these novel value chains. Whether it is supporting post-disaster recovery through investments in structures with code-plus designs that ensure resilience against fires and floods or second mortgages to retrofit homes with energy efficient air conditioning for elderly residents who are susceptible to extreme heat, the opportunities for product innovation are in direct proportion to the underlying need.

Local governments will need more sophisticated services for managing the risk and exposure of their portfolios of assets. Increasing public and private cooperation in infrastructure investment, development, and management is a near certainty in the face of climate change. Small businesses will need to make capital investments in new technologies and assets that take advantage of shifting markets and unstable supply chains. As populations shift and business models adapt, therein rests the opportunity to invest in a more sustainable way of life. The call to action for community development is to challenge the distributional equity of who bears the burden and who yields the benefits, particularly when it comes to public investment. There won’t be easy solutions that work for every community. Most of these determinations are subject to the judgement refined from local democratic processes concerning what to protect and what to let go, but the community development sector can begin the process of evaluating whether climate change will undermine existing investments and whether existing community development models are adequate to address climate change impacts. This analysis will yield new costs and benefits, but it is also likely to yield the necessary innovations that maximize the effectiveness of our investment in our most challenged populations.

For more on climate resiliency and the role for community development, watch presentations from the 2018 National Interagency Community Reinvestment Conference in Miami.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.