The first step in addressing a problem is acknowledging a problem, and potential climate risk for municipal bond issuers is no different. Each week, we’ll analyze the Preliminary Official Statements on the MSRB EMMA site to identify most notable differences between the risks disclosed and the risk revealed in our comprehensive coverage of all the issuers of municipal bonds.
This week’s distinction goes to:
The City of Marietta, Ohio
the OS for which can be found here.
A quick review of the robust 166 page document reveal the words “flood”, “climate”, or “disaster” appear precisely zero times,”natural” appears three times associated with gas or resource extraction, and “risk” has seven mentions all of which are specific to standard financial disclosure.
The risQ analysis indicates an alternate reality…
Comparing to all cities and towns across the US, Marietta is in the 96th percentile in terms of GDP impairment risk and the 89th percentile in terms of property value at risk. These place the town well within risQ cohorts for which loss of property value and impaired population growth have been observed over recent years.
The longest maturity in the series is in 2039, so we’ve also analyzed in that context in terms of the absolute risk levels, accounting for both severity and probability of events over the intervening years. Cumulatively, greater than 150% of annual GDP is likely to be impaired between now and 2039, or around 8% each year. A total of 35% of the property value will likely need to be replaced on an equivalent insured loss basis due to flooding.
risQ’s analyses are rigorously quantitative. In Marietta’s case, a cursory online search would validate a history of flooding events consistent with a clear risk.
We’re looking forward to working with issuers, bond insurers, sell-side, and buy-side market participants in disclosure, discussion and action on climate adaptation.