Moody’s, one of the biggest credit rating agency in the world, has issued warning to cities as well as states in the USA about the possible impact of climate change on them and how they are making preparations to mitigate such consequences or that there is a risk of them being downgraded. It seems the phrase climate changed is actually happening.
According to reports, Moody’s Investor Services, explained how it makes an assessment of the credit risks that are posed to a city or a state that witnesses the impact of climate change. Its assessment takes into account both short-term impacts or ‘climate shocks’ such as hurricanes, wildfires, or droughts, and long-term climate impacts such as ‘incremental climate trend’ including rising global temperatures or rising sea levels. The credit rating agency also takes into account, ‘(communities) preparedness for such shock and their activities with respect to adapting to climate change.’
The report adds that “If you have a place that throws up its hands in the face of changes to climate trends then we have to evaluate it on ongoing basis to see how abdication of response translates into changes in credit profile,” said Michael Wertz, Vice President, Moody’s.
New York, London, Mumbai, prone to floods due to rising sea levels: NASA
Climate changed: A National Aeronautics and Space Administration (NASA) report predicts that certain cities are facing the maximum threat due to rise in sea levels due to melting of ice caps triggered by climate change as well as global warming. The NASA study has warned that New York, London, Mumbai, and Mangalore as prone to floods as ice caps melt and lead to rise in sea levels. NASA predictions about climate change seems correct as heavy rainfall has been frequently hitting Mumbai and Mangalore, leading to floods in many pockets.
As countries and cities try to mitigate flooding, they have to think about 100 years in future, and they want to assess the risk in the same way as insurance companies do, says Erik Ivins, senior researcher at Jet Propulsion Laboratory run by NASA, says. .
Climate changed? Moody’s warning about global warming is worrisome
Ratings from credit agencies like Moody’s assist in determining interest rates on bonds for cities as well as states. The maths is like this: the lower the ratings, the greater is the risk of some default. This translates into the fact that cities and states with low ratings could be expected to cough up higher interest rates on the bonds.
“This puts direct economic incentive (for communities) to take protective measures against climate change,” said Rachel Cleetus, lead economist and climate policy manager at the Union of Concerned Scientists.
Moody’s is the first credit rating agency of the USA to go public on how the organization factors in climate change risks into the credit rating assessments. This is the latest ‘market signal,’ says a climate change expert, adding, ‘what seemed a distant future is getting accounted for in the present. People need to start making preparations now based on the reality of several of such places and cities.’
In the report, Moody’s has broken up the USA into seven ‘climate regions,’ based on geography, economy, and risks. In the Midwest, ‘impact on agriculture is forecast to be the most significant economic effect of climate change,’ the report says. The Southwest has been projected as more vulnerable to drought, extreme heat, rising sea level, and wildfire. Similarly, the report predicts rising sea level and its impact on coastal infrastructure as the biggest factor for the Northeast of the United States of America.
According to the Moody’s report, analysts are asking vulnerable people as well as communities, which face a high risk of being impacted by climate change, on how they are preparing for the risks.