Features | January 11, 2018

Bond investors are getting smarter about flood risks

The team at


In November, credit rating agency Moody’s warned cities and states that failing to address climate risks could hurt their bond ratings, potentially affecting the flow of trillions of dollars to coastal municipalities. “What we want people to realize is: “If you’re exposed, we know that,” Lenny Jones, a managing director at Moody’s, told Bloomberg. “We’re going to ask questions about what you’re doing to mitigate that exposure.”

Investors are taking note and some are taking steps to learn more about the climate risks to their bond investments in coastal areas.

Breckinridge Capital Advisors, a Boston fixed-income investment manager with $30 billion in municipal bonds under management, has adopted a new flood-risk indicator developed by climate research organization Climate Central.

Analysts use the tool to assign municipalities a score of 0 to 100 based on the portion of their population at risk of flooding. “Flood risk has long been a part of our credit research, but we are always looking for new and innovative ways to improve our data, process and analysis,” says Mike Bonanno, a Breckinridge analyst.

Cities too are taking action. New York is redrawing its flood zones, an effort that will affect where new buildings are constructed and the cost of flood insurance on homes and skyscrapers. The city is still recovering from 2012’s Hurricane Sandy, which caused $19 billion in damage.