Fannie Mae's Focus on Climate

More than 30 years ago, I attended my first Earth Day event as a college student, knowing it was a good cause but unaware of the real and rising risks of climate change. That year, in 1991, the U.S. experienced four weather disasters with damages over $1 billion. Last year, the number of billion-plus-dollar disasters was 18, including major flooding across California, historically damaging tornadoes across the Midwest and South, hurricanes in Florida, wildfires, and more. As the frequency of severe weather events is increasing, the focus on climate has never been more important.

That's why managing the growing impacts of climate change is a significant element of Fannie Mae's corporate strategy. Our Climate Impact team is working hard to help the company study, manage, and mitigate climate risks. We're also committed to looking beyond our own financial risk, because we realize that the real-world impacts of climate change extend to people and communities. In recognition of Earth Day, I want to highlight the important work Fannie Mae is doing across three areas: focusing on community resilience, looking deeper into the impact of climate change on housing in the U.S., and protecting current and future housing stock.

Focusing on communities  
In 2020, Fannie Mae conducted a national survey of homeowners and renters in the U.S. to better understand consumer awareness, comprehension, and attitudes toward flood risk, flood insurance, and related resources. We found that awareness of flood risk is low, particularly for those in areas at high risk for flooding.¹ Last year, we initiated a new nationwide flood survey to gauge how the results have changed due to numerous policy and macroeconomic changes. We plan to share our insights and analysis with the public, including additional data specific to underserved communities and overall sentiment about climate.

We have also been working to provide predictive climate data to lay the groundwork to help communities plan for climate change. Recently, we worked with the cities of Memphis and Baltimore to analyze how their risk is expected to change over time. We hope this effort may soon encourage communities and consumers to wisely invest in greater resilience at both the community and individual property level. You can learn more about this effort and other initiatives we're undertaking to help communities in our Equitable Housing Finance Plan².

In 2022, we also launched a flood risk awareness campaign in select markets focused on educating homeowners both inside and outside Federal Emergency Management Agency (FEMA)-designated Special Flood Hazard Areas about the risks of flooding. We hope to increase homeowners' understanding of flood risk and hazards, as well as educate them on the importance of taking flood risk mitigation measures such as purchasing flood insurance. You can find more information and resources on our website to help prepare for severe weather.

Understanding the impact on housing
Climate change and the potential transition to a lower carbon economy presents risks and opportunities for the housing market and the overall economy. Fannie Mae has been focused on developing a deeper understanding of the impacts of climate change on the overall U.S. housing market. We have consulted with a variety of catastrophe and climate risk experts across the modeling spectrum, including firms specializing in emerging climate risk metrics. We have also engaged in research to better understand the impact of climate change on capital markets, including examining flood risk across the U.S. housing market and the impact of Hurricane Harvey on borrower performance^{3, 4} .

Protecting current and future housing stock
One way to mitigate climate-related risk is to ensure that more properties are built or renovated to withstand extreme weather. We are working to support these efforts by collaborating with industry partners to strengthen building resiliency standards, helping ensure that climate risks are considered during construction, and that best practices are shared across communities and the housing industry. For example, Fannie Mae is currently partnering with the Insurance Institute for Business & Home Safety to highlight existing and emerging building standards and to tie the work of builders and consumers to groups who want to support resilient housing. We are also working with the National Institute of Building Sciences (NIBS) to develop a roadmap on mitigation investment to help prepare for and better respond to the effects of climate change⁵ .

There is much more work to be done to understand, communicate, and address the risks associated with a changing climate on the nation's housing system and infrastructure. We are working to ensure the impacts of climate and natural disaster are integrated into governance and policy decision-making so that we can monitor this evolving space. Additionally, we are working to better understand where climate-related information can impact the homeownership and renter journey frameworks so that we can determine how to help households make important decisions. Overall, Fannie Mae remains committed to continuing this work to see where actions could be taken by the GSEs, our regulator, or other stakeholders to improve climate resiliency in communities across the country.

¹ https://www.fanniemae.com/research-and-insights/perspectives/consumer-awareness-flood-risk-and-insurance/

² https://www.fanniemae.com/about-us/esg/social/equitable-housing-finance-plan

³ Kousky, C., Kunreuther, H., LaCour-Little, M. and Wachter, S. (2020). Flood Risk and the U.S. Housing Market, Journal of Housing Research, 29:sup1, S3-S24.

⁴ Kousky, C., Palim, M. and Pan, Y. (2020). Flood Damage and Mortgage Credit Risk: A Case Study of Hurricane Harvey, Journal of Housing Research, 29:sup1, S86-S120.

⁵ https://www.nibs.org/news/nibs-joins-fannie-mae-develop-roadmap-mitigation-investment