The impact of climate change is putting an additional financial burden on those with the fewest resources to manage financial and life stressors—creating implications for worker productivity, employers’ bottom lines, and employees’ financial security, according to Commonwealth’s new report, Feeling the Heat: Climate Change’s Impact on Worker Financial Security.
On October 11, Commonwealth and SOCAP Global hosted a webinar related to the new report with the aim to better understand the impact of extreme and unusual weather on workers living on low and moderate incomes (LMI)—and in particular, the impact on their financial situations. The panelists came from three very different sectors: an employer, an academic, and a consultant.
Moderated by Timothy Flacke of Commonwealth, the panelists included Liliana Diaz of APCO Global, Julie Gehrki at Walmart and Walmart Foundation, and Emily Williams of Harvard Business School. The discussion delved into the realities of how climate change is and will continue to affect workers’ health, well-being, and living situations, and what actions employers, policymakers, and financial institutions can take to mitigate this impact.
Here are three key takeaways from the webinar:
- The financial impact of climate change on everyday household finances is adding up—and more research is needed.
Panelist Emily Williams shared that today there is little data and research on the everyday climate risks affecting people’s finances, living situations, and well-being. Most of the research, she said, accounts for physical impacts from disasters like wildfires, extreme temperatures, and hurricanes. “As these events become more and more common, documenting the less visible effects of climate change that impact people financially is really important,” Emily said.
This is starting to change. Emily’s research at Harvard Business School is examining household finances in the context of temperature variations. And a September 2023 report from from the U.S. Treasury indicates that climate change will cause significant financial strain to households in the coming years, citing reduced earnings and access to employee benefits as top concerns.
Commonwealth’s survey found that 54% of workers living on LMI said extreme weather is negatively impacting them or someone they know. Meanwhile, 46% of workers surveyed are not confident that they could financially recover if unusual or extreme weather were to impact them tomorrow.
Emily referred to a stacking effect that extreme weather patterns have on people earning LMI in the United States. For example, during periods of extreme heat—specifically, heat and humidity combined—financial data from subgroups of this population show a decline in income, which possibly indicates worker absenteeism. When digging deeper, incidences of overdraft and non-sufficient fund fees increase during this time, suggesting further deterioration of financial health.
- Short-term (missed work, lost hours) and long-term events (lost housing, inability to get insurance) are significantly impacting worker financial security and will continue to intensify without intervention.
Panelist Julie Gehrki said Walmart works diligently to prevent the worst impacts of climate change—from mapping changes that lower carbon emissions, to clearing pathways for disaster relief and community resiliency. She also noted that 90% of Americans live within 10 miles of a Walmart store.
“Small and large disasters are happening near our operations every day,” Gehrki said. ”Whether it’s a flooded road, a water shortage, or hurricane, it’s our civic responsibility to make sure we are supporting our communities with systems to efficiently and effectively respond. It’s an essential part of our core business model’s focus on resilience.”
Julie said the first topic their emergency operations team raises during a climate-related event is the safety and well-being of their employees. “Are they healthy? Are they safe? Are we in contact? How are we supporting them?”
In the Commonwealth survey, data showed climate change is also affecting the financial security of workers, with 49% of respondents saying they have become less secure in their financial situation, and 28% have lost their financial stability altogether. More than 80% of workers surveyed said they wanted expanded employer response to help mitigate the financial impact of extreme weather events.
In circumstances where employees need financial support during acute issues, such as losing a car or house damage, Walmart activates its Employee Assistance fund and offers financial grants intended to supplement the assistance from insurance and FEMA. Julie said the retailer is committed to building on what’s learned, striving to “help associates come back strong.”
- Businesses are already seeing the effects on their bottom lines, and the impact to productivity, retention, and other factors will be material if these issues are left unaddressed.
Panelist Liliana Diaz said her work focuses on delivering strategic advisory and solutions to organizations addressing climate change and navigating transitions to a net zero economy. Net zero refers to the balance between the amount of greenhouse gas that’s produced and the amount that’s removed from the atmosphere.
Company leaders and policymakers mapping net zero strategies must also account for the impact climate change and net zero transitions may have on the well-being and the productivity of their workforce.
“The simple truth is that productivity falls as temperature increases,” she said. “Publicly available estimates show that when the thermometer hits 90 degrees, productivity slumps by 25%. That’s a huge chunk.”
Diaz added, “Being proactive is key, which means thinking ahead about policies and procedures that not only promote the health and well-being of their workforce, but also help them gain a competitive advantage.”
Commonwealth’s Executive Director and panel moderator Timothy Flacke closed the discussion and said, “Climate research often focuses on economic costs, but to get a full picture on the economic impacts on individual workers and the subsequent effect on the bottom lines for businesses, the conversation needs to continue.”