Sea Level Rise and Municipal Bond Yields

40 Pages Posted: 11 Nov 2019

See all articles by Paul S. Goldsmith-Pinkham

Paul S. Goldsmith-Pinkham

Yale School of Management

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Ryan Lewis

University of Colorado, Boulder

Michael Schwert

University of Pennsylvania - The Wharton School

Date Written: October 30, 2019

Abstract

This paper examines the effects of climate change on municipal financing costs. Using a sample of bonds issued by school districts in coastal counties, we show that municipal bond markets began pricing sea level rise (SLR) exposure following upward revisions in SLR projections in 2013. The effect is concentrated on the East Coast, where SLR is expected to be twice as large as on the West Coast, is increasing in states' belief in climate change, and is driven largely by a district's exposure to worst-case SLR scenarios. While the pricing effects of SLR are statistically significant, they are economically small and indicate that financial markets do not currently anticipate a high probability of SLR-induced default in the near future.

Keywords: Climate Change, Asset Prices, Sea Level Rise, Municipal Bonds

JEL Classification: G1, G12

Suggested Citation

Goldsmith-Pinkham, Paul S. and Gustafson, Matthew and Lewis, Ryan and Schwert, Michael, Sea Level Rise and Municipal Bond Yields (October 30, 2019). Available at SSRN: https://ssrn.com/abstract=3478364 or http://dx.doi.org/10.2139/ssrn.3478364

Paul S. Goldsmith-Pinkham

Yale School of Management ( email )

NY
United States

HOME PAGE: http://paulgp.github.io

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Ryan Lewis (Contact Author)

University of Colorado, Boulder ( email )

Boulder, CO 80309-0419
United States

Michael Schwert

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
142
Abstract Views
555
rank
216,249
PlumX Metrics