The Basics:

• Investopedia states that Moody’s Investor Services is a subsidiary of Moody’s and as part of their function “assigns ratings on the basis of assessed risk and the borrower’s ability to make interest payments.” This is done for bonds, preferred stock, and government entities.
• In the announcement Moody’s highlighted from the report that “the growing effects of climate change…are forecast to have an increasing economic impact on US state and local issuers.” And that “This will be a growing negative credit factor for issuers without  sufficient adaptation and mitigation strategies.”
• NPR reports that “Moody’s is the first of the country’s big three credit rating agencies to publicly outline how it weighs climate change risks into its credit rating assessments.” And that “Ratings from agencies such Moody’s help determine interest rates on bonds for cities and states. The lower the rating, the greater the risk of default. That means cities or states with a low rating can expect to pay higher interest rates on bonds.”
• According to Bloomberg, ”In its report, Moody’s lists six indicators it uses ‘to assess the exposure and overall susceptibility to U.S. states to the physical effects of climate change.’ They include the the share of 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 floodplain.”

It remains to be seen, at least by us, what exactly will transpire going forward because of this announcement. However, certain cities and states may begin to place greater emphasis and commit more resources towards adapting to and mitigating climate change.

About the author: Joe Carpenter is the Programs Director at CABA. Previously, he served as an Officer in the U.S. Army for nearly 10 years, including three combat deployments, and working for a small manufacturing company in a number of capacities. Joe graduated from the United States Military Academy at West Point with a Bachelor of Science degree in Management and from Harvard University Extension School with a Master of Liberal Arts degree in Sustainability; among a myriad of other educational experiences. Joe enjoys spending time in nature, working out, playing video games, watching improv comedy shows, and trying to figure out how things can be “done better.”