Other Voices: Climate change to affect city and state credit ratings
By San Antonio Express-News
Dec. 18, 2017 at 10:30 p.m.
Cities and states, take note. Climate inaction could lower your credit rating.A recent report from Moody's explains how the rating agency will assess climate change risk for states and cities. Risk indicators include economic activity along the coast, potential for hurricane and other extreme-weather damage, and the number of homes in a flood plain.
Moody's didn't identify cities in its report, but Texas is one of the states deemed most vulnerable to climate change. Not surprising because Texas has tremendous economic activity along the Gulf Coast and is prone to all sorts of extreme weather across the state.
Hurricane Harvey, which slammed into the Coastal Bend before dumping more more than 50 inches of rain on Houston, has caused an estimated $180 billion in damages. Many of the properties damaged were not in designated flood plains, raising questions about whether our mapping and flooding expectations are accurate in light of climate change.
Scientists have been discussing and studying the possibility that warmer oceans — a product of climate change — could lead to more intense hurricanes. Harvey was one of 10 hurricanes that swept across the Atlantic Ocean this season, National Public Radio reported. In a typical year, that number is six. Six of the hurricanes this year were at least Category 3 when they made landfall.
The perspective from Moody's is that if storms are going to be more intense and more frequent, destroying property that may or may not have appropriate insurance, then values and tax revenues will drop. And that's something bond investors should take into account.
Or, as a summary of the report says: "Climate shocks or extreme weather events have sharp, immediate and observable impacts on an issuer's infrastructure, economy and revenue base, and environment. As such, we factor these impacts into our analysis of an issuer's economy, fiscal position and capital infrastructure, as well as management's ability to marshal resources and implement strategies to drive recovery." ...
Our region has heavily invested in flood control projects. But modeling has also shown that ... more investment in infrastructure is needed as the area continues to grow.
At the state level, Gov. Greg Abbott has been a climate change skeptic, though his response to Hurricane Harvey has been superb. A large part of that response has been advocating for aid not only to rebuild but to mitigate future flooding and storm damage caused by extreme weather.
From our perspective, it's hard to separate such mitigation, or a sense of urgency, from the reality of a warming world.
Climate change has always been perceived as a problem for the future — if it's perceived as a problem at all. But the market is signaling a need for present-day action.
If science can't persuade action, perhaps the risk of a credit downgrade to states and cities will.