Climate Risk and Credit Ratings

53 Pages Posted: 23 Oct 2020 Last revised: 30 May 2023

See all articles by Nhu Tran

Nhu Tran

University of Richmond

Cihan Uzmanoglu

Binghamton University, The State University of New York

Date Written: October 9, 2020

Abstract

We find weak evidence suggesting that cities’ credit ratings reflect their climate risk exposures. Using a large sample of U.S. cities, we test whether cities with higher exposures to physical or transition risks of climate change have lower credit ratings. We also compare the ratings of coastal and similar noncoastal cities, and run difference-in-differences tests around events that raise climate change awareness. Moreover, we study the climate-risk effect within cities and at the bond-level. We observe a negative association between one of the climate risk proxies and ratings in one of the tests, which is driven by a single city.

Keywords: Climate Risk; Climate Change; Global Warming; Credit Ratings; Credit Rating Agencies; Cities; Municipalities; Cost of Capital; Sea Level Rise; Floods; Wildfires

JEL Classification: G24, G12, G18, Q54, Q52, Q58

Suggested Citation

Tran, Nhu and Uzmanoglu, Cihan, Climate Risk and Credit Ratings (October 9, 2020). Available at SSRN: https://ssrn.com/abstract=3708431 or http://dx.doi.org/10.2139/ssrn.3708431

Nhu Tran (Contact Author)

University of Richmond ( email )

28 Westhampton Way
Richmond, VA 23173
United States

Cihan Uzmanoglu

Binghamton University, The State University of New York ( email )

Binghamton, NY 13902-6001
United States
607 777 66 38 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
401
Abstract Views
1,660
Rank
134,774
PlumX Metrics