How Climate Change Affects Socially Vulnerable Communities

We view climate change as a threat multiplier—one that amplifies existing risks, including underfunded healthcare systems and disaster response programs. Understanding this interplay is therefore vital to finding solutions and ensuring that the benefits of a green economy transition are shared widely, while also supporting those who stand to lose economically as a result of climate change. While there are no overnight solutions to these challenges, we believe there are ways to alleviate the effects of climate change on socially vulnerable communities—and we think capital market participants have an active role to play by connecting their investment decisions with the delivery of positive social and environmental impacts.

Based on our work in both developing and developed markets, investors providing capital to renewable energy sources help lower carbon-heavy power generation, including from coal-fired power plants. This lowers greenhouse gas (GHG) emissions and reduces small particulate pollution in the atmosphere that has been proven to trigger respiratory related ailments including asthma for those living near power plants. It also reduces the generation of harmful toxic waste, such as coal ash which contains contaminants like mercury and arsenic and can pollute waterways, ground water and drinking water without proper management⁵. Research has shown that socially vulnerable communities make up a majority of people next to coal-fired plants and near coal ash disposal. Therefore, the transition to renewable energy power generation has the potential to result in better health outcomes for these communities.

At the sovereign level, countries are seeking to raise capital via green bonds intended to address environmental issues. An emerging trend is countries not only publishing environmental impact reports, but also committing to social co-benefit reporting from their ESG-labelled debt issuance. One example is the UK Government’s Green Gilt issuance in 2021⁶. Supporting and encouraging more environmental and social co-benefit focused financing is another way investors can help address the impact of climate change on socially vulnerable communities. We continue to encourage this effort more broadly among sovereign, supranational and agency issuers.

Real estate investment is another area of focus. Research published in the British Medical Journal (BMJ) has shown a convincing link between anticipated energy efficiency improvements in the UK housing stock, and positive public health outcomes related not only to lower winter mortality and morbidity, but also to improved ventilation⁷. With this in mind, one focal area for real estate investors could be how their investments, including in social housing, better address the parallel challenges of lower GHG emissions, improved heating efficiency, improved ventilation and reduced exposure to indoor pollutants, and contribute positively to other health-related issues, such as mental health.  These efforts may lead to better environmental and health outcomes broadly but positively impact socially vulnerable communities the most.