Moody’s: Climate Change Will Affect Your Credit Rating

In a new report, Moody’s Investor Services becomes the first of the three major credit-rating agencies to outline how the threat of climate will affect the bond ratings of a given city, county or state.

The company plans to take into account both the actual risk of the effects of climate change—floods, wildfires, rising sea levels, hurricanes—and whether or not appropriate measures have been taken to prepare for those risks.

At NPR, Nathan Rott quotes a Moody’s executive:

"'If you have a place that simply throws up its hands in the face of changes to climate trends, then we have to sort of evaluate it on an ongoing basis to see how that abdication of response actually translates to changes in its credit profile,' says Michael Wertz, a Moody's vice president."

Rott writes that in some places, like South Florida, a fair amount has been done to mitigate potential effects a changing climate, but that “it can be difficult for a policymaker to justify a big investment when the associated benefits or risks seem a long way down the road.”

Significantly, “Moody’s announcement may change that,” Rott writes, effectively created an immediate economic incentive to include climate change preparedness in city and state budgets.