Economic theory suggests that the presence of undiversifiable background risks influences household portfolio choices. Households face significant location-specific background risks due to sea level rise (SLR). Using detailed local variation in SLR exposure and disaggregated geographic information on households in the United States, I show that SLR exposed homeowners are less likely to participate in the stock market and invest a smaller share of their financial wealth in risky assets, compared to unexposed homeowners in the same neighborhood. Differences in risk preferences and endogenous location choices are unable to explain this effect. Placebo tests in a sample of only renters corroborate that homeownership is the channel through which SLR affects portfolio choices. Using plausibly exogenous variation stemming from the adoption of state-led climate change adaptation plans that reduced households’ SLR risks, I provide causal evidence of the effect of SLR risks on portfolio allocation decisions. Following the adoption of such climate adaptation plans, SLR exposed households increase their stock market participation and hold a larger risky share in their financial wealth. I do not observe similar patterns using measures of short-run flood risk. The observed effect of SLR exposure on household stock market participation behavior also does not vary with differences in political party affiliation, but it is aggravated at times when households' attention to climate change is elevated.