Municipalities like Hoboken, New Jersey, and New York City, both pictured here, could face higher interest rates on bonds if they fail to prepare for climate impacts. Jeffrey Vock Photography / Wikimedia
Moody’s Investors Service, one of the top credit rating agencies in the world, warned cities and states in the U.S. that unless they prepare for climate change, the agency could lower their credit ratings, making it harder for them to obtain low-interest bonds.
The agency told clients this week that Moody’s analysts examine the climate risks that municipalities and states face and their efforts to plan and prepare for these impacts. These include both long-term threats, such as sea level rise, as well as what Moody’s calls “climate shocks” — extreme weather like floods, droughts, and coastal storms. These impacts, the company said, increase a city or state’s risk of defaulting on a loan.
In making credit ratings decisions, analysts examine factors such as the economic importance of coastal regions, damage from extreme weather as a share of state or local economies, and the number of homes in flood plains, Bloomberg News reported. In the announcement to its clients, Moody’s said that communities in Texas, Florida, Georgia, and Mississippi are most at risk from climate change.
“What we want people to realize is: If you’re exposed, we know that,” Lenny Jones, a managing director at Moody’s, told reporters. “That’s taken into your credit ratings.”
