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Investors and Bond-Rating Analysts Are Working to Quantify Risks from Climate Change
Bonds, insurance, climate risk: “a cataclysmic issue”
“Going forward, cities that lack the resources to invest in climate remediation may see their credit ratings decline as result”
“Those longer-term risks “are not priced into the market today,”
He cited the difficulty of evaluating the flood risk for a regional mall that sits atop a hill. Whereas the mall itself might not be at risk for flooding, “how do people get to you? Your inventory will be fine, but nobody will be there to buy it,” he said. “It’s more of an issue than just your physical building.”
“damage from rare extreme weather events did not have a significant effect on value because buildings almost always could be repaired. But with catastrophic storms and floods becoming more frequent in some areas, the value of the underlying land will be at risk as well. Insurers are not going to protect property owners against the risk that they will not be able to find a future buyer, he said.”
“By the third flood, prospective buyers know you have a waterlogged building,” Glendon said. “And you lose land value.”
“The rising threat to value from climate change will not be borne by insurance companies because they can re-price coverage, Glendon said. “The risk is for the people who hold the mortgages.”