Middle-class residents of cities worst affected by climate change are cutting back on luxury and discretionary spending to commit more of their household budget to housing and environmental protection measures, as they fight to defend their homes against the impact of climate change.
According to the analysis released on Monday by banking giant UBS, residents in some of the world's cities most vulnerable to climate change - such as Los Angeles, Tokyo and Shanghai - are spending 0.6 per cent and 0.8 per cent more on housing than the national average.
In the US, middle class residents in cities with a high climate risk spend between $800 and $1,600 more annually on housing than those in lower-risk cities. Added costs include higher insurance premiums, the cost of damage from climate-related weather events such as floods and heatwaves, and the installation of relief measures such as air conditioning units to help residents cope with rising temperatures.
Paul Donovan, global economist and managing director at UBS Investment Bank, said the squeeze on middle class spending in such cities could prove influential in determining how governments respond to the challenge of climate change.
"The middle class has two important qualities that make them critically important to the conversation about climate change: substantial assets and political influence," he said in a statement. "If the effects of climate change significantly hurt the middle class, the inevitable reaction should in turn elicit a strong response from policy makers. It is a big reason why the latest United Nations Framework Convention on Climate Change agreement in Paris was signed by all 196 participating countries - the threat is real."
The study suggests a number of strategies to mitigate climate change risk for the global middle class.
For example, it suggests a range of reforms to the insurance market, such as ensuring policies better reflect the real climate risks facing homeowners, the creation of more public-private insurance partnerships to support those unable to invest in risk-based premiums, and the development of multi-year insurance contracts tied to the property's structure rather than its owner.
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