“Until we get building codes passed at local and state levels that are meaningful, then we’re going to continue to see a lot of damage and destruction,” Long said during a press conference in October. “If you want to live in these areas, you’ve got to do it in a more resilient fashion.”
Investors and policy experts likewise rejected the rating companies’ assertion that cities are getting ready for the effects of global warming.
“I haven’t seen that,” Eric Glass, who manages AllianceBernstein LP’s $400 million municipal-impact portfolio, said in an interview. He said that aside from a handful of cities such as New York, San Francisco and Houston, few communities are making meaningful investments to protect their residents.
“It’s just not true,” added Colin Sullivan, chief operating officer of risQ Inc., a company in Cambridge, Massachusetts, that measures municipal climate risk for investors.
“It doesn’t resonate with my experience at all,” said Shalini Vajjhala, a former Obama administration official and founder of Re:Focus Partners, which works with cities to prepare for extreme weather. “Many cities have developed essential plans and strategies, but far fewer have actually measurably reduced risk.”
Others said it wasn’t surprising that the companies have yet to account for climate change, despite their promises.
“Our view is that the rating agencies have not incorporated climate change in their ratings yet," said James Lyman, director of research, municipal fixed income for Neuberger Berman Group LLC. “To be fair, rating agencies in general have a difficult time basing ratings on potential outcomes that are far in the future.”
Adam Stern, senior vice president and co-head of credit research at Breckinridge Capital Advisors, Inc., likewise sympathized with the challenges that rating companies face with incorporating climate risks.
“The negative impact of climate change, to the extent it affects some issuers, is very hard to quantify,” Stern said by email. “For that reason, the rating agencies are likely to move slowly with downgrades, and when they eventually begin to downgrade issuers, it’s likely going to be for a pretty extreme failure to acknowledge and/or address the risks.”
This story provided by Bloomberg News.