Cascading Climate Risks: An adaptive decision-making framework for anticipating climate risks to mortgage providers and homeowners.

This study presents an innovative methodological and interdisciplinary approach to addressing cascading climate risks in the housing finance sector. In collaboration with a large bank, the research team comprising behavioural, climate, and finance experts developed a decision-making framework to help anticipate and respond to future physical climate risks driven by the increasing frequency and intensity of extreme weather events. We used a qualitative-interview based approach with key decision-makers in the bank to identify six interconnected risk types: household, insurance, measurement, reputational, regulatory and credit loss. Then, building on two complementary methodologies – Storylines and Dynamic Adaptive Policy Pathways – we constructed plausible trajectories, integrating climate risk information, to facilitate development and implementation of risk-mitigation strategies by the bank. The study highlights a potential method for anticipating and preparing for climate-related financial vulnerabilities, especially in real estate markets where people may be unwilling (or unable) to move to new locations.