A report by Moody's Investors Service, out today, looks in-depth at how the ratings agency assesses climate change risks — such as extreme heat, rising sea levels, extreme weather events, "nuisance" flooding and more — for state and municipal governments that are becoming more severe over time.
Why it matters: The report — which explores both underlying trends and climate "shocks" from extreme events — offers a window into how specialists view the long-term fiscal risks from climate change.
How it matters: The report catalogs different effects, such as how climate "shocks" can weaken a region's economic output and the valuation of its tax base. Also, emergency response costs can challenge a local government's fiscal flexibility. Another example: Local governments may face increased debt burdens to finance the repair and replacement of infrastructure.
Key quote: "This will be a growing negative credit factor for issuers without sufficient adaptation and mitigation strategies," they note in a summary.
Bottom line: "The interplay between an issuer's exposure to climate shocks and its resilience to this vulnerability is an increasingly important part of our credit analysis, and one that will take on even greater significance as climate change continues," the report states.
"We are always seeking to be as transparent as we possibly can with respect to how we go about reaching our ratings conclusions," Michael Wertz, a senior analyst with Moody's, tells Axios.
In their words:
