Sustainable Investment Under Climate Risk: Evidence from California Wildfires

• In Event: Crisis and Change: How Environmental Shocks Reshape Policy, Labor, and Land

Abstract

Increasingly frequent and severe climatic disasters, such as flooding and wildfires, have raised concerns about the vulnerability of the built environment. While these disaster events pose significant challenges, they also serve as stimuli for transformative changes in community adaptation strategies. In particular, wildfire can drive green investment in the built environment through both direct and indirect mechanisms. The post-wildfire reconstruction offers an immediate opportunity for local communities and governments to retrofit existing building stocks and to rebuild with more resilient and sustainable designs as part of a broader climate adaptation strategy. Furthermore, wildfires may heighten public awareness of environmental and climate risks, thereby driving greater demand for green investment as part of broader climate mitigation and adaptation strategies. While the existing literature has explored the risk updating effect of weather anomalies, much less attention has been paid to the impact of destructive natural disasters on the development and integration of green infrastructure during the post-disaster recovery stage.

This study addresses this gap by exploring the extent to which wildfires may stimulate green investment across California. To estimate local exposure to wildfires, we overlay spatial data on wildfire burn perimeters and ignition-to-containment timeline with gridded population data. We focus on three types of green investments in the residential and commercial sectors that can enhance building resilience and sustainability: certified green buildings, solar panel installations, and electric vehicle charging stations. Using data from the U.S. Green Building Council, Shovels.ai, and the Berkeley National Lab, we construct a city-level panel dataset covering 2000 to 2021, combining historical data on wildfire events, green infrastructure and technology adoption, and municipal-level socio-economic and policy factors. We estimate two-way fixed effects models to evaluate the impact of wildfire exposure on the patterns of green infrastructure and technology investment over time. Our findings will offer insights into both the immediate (direct) and broader (indirect) impacts of wildfires on climate adaptation and mitigation strategies within the built environment.

Author

• Wei GUO, University of California, Riverside
  Presenting Author