Sea Level Rise and Municipal Bond Yields
40 Pages Posted: 11 Nov 2019
Date Written: October 30, 2019
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: Suggested Citation