Moody’s considers climate plans when determining local credit ratings | U.S. Green Building Council
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The investors service suggests cities create climate mitigation plans that respond to their localized risk.

The global effects of climate change are forecast to have an increasing economic impact on states and cities across the U.S. Two impacts in particular, rising sea levels and increasing heat, are becoming the key economic risks for many cities—and drive heightened discussion on the ability of cities to mitigate and adapt to climate change.

Moody’s Investors Service, a major credit rating agency, announced last fall that it is embedding climate risks as a key factor when analyzing the factors it uses to determine a state or local government’s credit rating.

A good credit rating is crucial for cities looking to attract capital and issue bonds. According to Moody’s, both climate trends and climate shocks affect a city’s credit risk. Specifically, credit risks to issuers from climate change include economic disruption due to property loss, physical damage to infrastructure or communication assets, health and public safety and population displacement. All of these can put significant stress on an issuer’s budget and economic stability.

However, Moody’s Investors Service suggests actions cities can take to set themselves apart, from a credit analysis standpoint. One of these is the creation of a municipal climate mitigation plan that systematically captures what issuers are doing to respond to their localized climate risk.

A climate mitigation plan needs to have three aspects, according to Moody's:

  1. An articulation of the cost of recent extreme weather events, as well as an estimation of future ones
  2. The cost of the government’s current and future mitigation actions
  3. The nuts and bolts of how these actions might be financed

Analysts are looking for a local jurisdiction to demonstrate that they have articulated a well-thought-out approach to mitigation of climate change. Creating, updating and executing on climate change action plans gives cities an excellent opportunity to demonstrate to rating agencies and the public that they are accounting for and working to offset their local climate risk.

USGBC helps cities reduce climate risk by incorporating resilience into rating systems, including LEED, SITES, and PEER; and offering on-demand courses and a resilience pathway on Education @USGBC.

Read USGBC’s recent resilience brief highlighting local action.

Explore resilience resources