CityLab.com
What Climate Change Could Do to Cities' Power to Borrow Money
Municipal bonds are considered a conservative investment, with a current default rate of around 0.3 percent, according to Matt Fabian, a partner at Municipal Market Analytics. To date, the bond market has done little to reflect that the risk may be increasing.
“There is almost no impact on muni bond prices with respect to climate change vulnerabilities. Prices do not acknowledge the risk in climate change,” he said. “Most investors believe that [climate change] is going to start affecting the market right after their own bonds mature.”
As more investors and firms study the risks, however, that might change.
“We are about a year away from climate change beginning to affect the muni market—a little,” Fabian said. “Changes on the investor side are going to happen first, [credit] ratings will come second, and issuer behavior will be a distant third.”