September 24, 2019 / 4:59 PM / a month ago

Climate change poses credit risk as U.S. Midwest, Southeast heat up -Moody's

CHICAGO, Sept 24 (Reuters) - Local governments in the U.S. Midwest and Southeast regions face elevated exposure to climate change in the coming decades as rising temperatures pose a credit risk for their debt, Moody’s Investors Service said on Tuesday.

The credit rating agency said heat stress could hurt agriculture, lower labor productivity, increase infrastructure costs, boost energy demand and impair public health.

“If significant enough, now and over ensuing decades, these difficulties have the potential to lower revenue, increase expenses, impair assets and increase liabilities and debt, among other effects,” Moody’s said in a report.

Wall Street credit agencies, which rate debt sold by states, cities, schools and other issuers in the U.S. municipal bond market, are increasingly looking at climate change in their analyses.

Four Twenty Seven, a climate data firm in which Moody’s is a majority stakeholder, projects the hottest average day in areas of the Midwest in 2030-40 will be about 7% higher than during the 1975-2005 period, according to the report.

Missouri, western Illinois and southeast Iowa would be particularly impacted. In the Southeast, the number of extreme heat days is projected to more than double in south Florida.

Moody’s said the Midwest and Southeast account for most of the approximately $190 billion of local government debt it rates that is exposed to high or very high projected heat stress.

It added that the two regions have strengths that provide a cushion against risks, noting the Southeast’s large tax bases and growing population and the Midwest’s “healthy cash balances and median family incomes.” (Reporting by Karen Pierog in Chicago Editing by Matthew Lewis)

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