Moody’s says cities may face credit downgrades if they don’t address climate risks

Credit ratings giant will ask what communities are doing to mitigate risk exposure.

December 20, 2017 |

Moody’s Investors Service Inc. recently warned coastal communities that it might lower their credit ratings if they don’t address the risks stemming from climate change.

The credit rating agency giant says that coastal locations are at risk from surging seas and intense storms. Therefore, they are at greater risk of defaulting on bonds.

Moody’s will ask questions about what cities are doing to mitigate risk exposure, an executive from the agency told Bloomberg. Moody’s assesses several factors related to climate change such as economic activity that comes from coastal areas, hurricane and extreme-weather damage as a share of the economy, and the share of homes in a flood plain.

The company has been pressured by investors to be more forthcoming about how it factors climate change into how it determines ratings. In theBloomberg report, the Moody’s executive said he couldn’t recall any examples to date of the company downgrading a city or state because it failed to address climate risk. But, that could change in the future.

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