San Francisco city skyline with an orange sky and haze during 2020 labor day fires.

Climate risks shake up the municipal bond market

As climate disasters intensify, the $4 trillion municipal bond market is starting to recognize the financial risks posed by extreme weather, with a recent credit downgrade in Los Angeles marking a significant shift.

Thomas Frank reports for E&E News.


In short:

  • S&P Global Ratings downgraded the Los Angeles Department of Water and Power’s credit rating, citing increasing wildfire risks, causing bond values to drop and borrowing costs to rise.
  • The downgrade signals a broader shift in the municipal bond market, which has historically overlooked climate risks despite the potential for disasters to erode tax bases and increase liabilities.
  • President Donald Trump’s discussions about reducing federal disaster aid could further expose municipal bonds to climate risks by removing a financial safety net.

Key quote:

“Physical climate risks are an increasing credit consideration.”

— S&P Global Ratings

Why this matters:

Municipal bonds fund much of the country’s infrastructure, from schools to water systems, and are often considered safe investments. But as climate-fueled disasters worsen, cities could struggle to repay debts, raising borrowing costs and making infrastructure projects more expensive. If credit ratings begin factoring in climate risks more aggressively, investors may demand higher interest rates or shy away from bonds in disaster-prone areas. The potential reduction in federal disaster aid could amplify these risks, forcing local governments to rethink how they finance recovery and resilience efforts.

Regulators are underestimating health impacts from air pollution: Study

Regulators are underestimating health impacts from air pollution: Study

"The reality is, we are not exposed to one chemical at a time.”

Health impacts are likely being underestimated by traditional risk models used by regulators, according to a new study that has found a different way to measure the cumulative risk air pollution poses to health.

Keep reading...Show less
Sunrise in the woods

Get our Good News newsletter

Get the best positive, solutions-oriented stories we've seen on the intersection of our health and environment, FREE every Tuesday in your inbox. Subscribe here today. Keep the change tomorrow.

Pope Francis smiles and waves as an enormous crowd surrounds him taking pictures.
Credit: Photo by Ashwin Vaswani/Unsplash

Pope Francis, who used faith and science to call out the climate crisis, dies at 88

Pope Francis died this morning at the age of 88. He spent his papacy urging world leaders and everyday Catholics to treat climate change as both a scientific fact and a moral emergency.

Euronews reports.

Keep reading...Show less
Sunrise over a tropical forest with hills in background.

Extreme heat and drought weakened forests’ ability to absorb carbon dioxide in 2024

The amount of carbon dioxide in Earth’s atmosphere rose at record speed in 2024, likely because rainforests and other ecosystems, stressed by extreme heat and drought, absorbed far less carbon than usual.

Sarah Kaplan reports for The Washington Post.

Keep reading...Show less
A patchwork of agricultural fields and fragmented Amazon forest.

Trump’s China tariffs drive up Brazil soy farming and Amazon deforestation

China is expected to buy more soybeans from Brazil — accelerating forest loss in the Amazon and the Cerrado — as U.S. tariffs disrupt global agricultural trade.

Sarah Sax reports for The Atlantic.

Keep reading...Show less
Cargo ships docked at port.
Credit: Andy Li/Unsplash

New international carbon tax on shipping is significant, but falls short of climate goals

A new carbon pricing system adopted by the International Maritime Organization could reduce global shipping emissions slightly by 2030 but fails to meet the agency’s climate targets.

Joseph Winters reports for Grist.

Keep reading...Show less
Red and black ship on sea under blue sky during daytime.

Tankers shipping U.S. LNG emit more greenhouse gases than all the country's electric cars can offset

A single year of emissions from U.S. liquefied natural gas (LNG) exports by ship outweighs the climate benefits of every electric vehicle on American roads, according to a new analysis.

Phil McKenna and Peter Aldhous report for Inside Climate News.

Keep reading...Show less
An ocean research ship on the sea with a cargo ship in the background during daytime.

UK pilot tests carbon removal by drawing CO2 from seawater instead of air

A pioneering project on England’s south coast is testing whether it’s more efficient to pull carbon dioxide out of seawater rather than the atmosphere in an effort to help reduce greenhouse gases.

Jonah Fisher reports for BBC.

Keep reading...Show less
From our Newsroom
Pennsylvania governor Josh Shapiro speaks with the state flag and American flag behind him.

Two years into his term, has Gov. Shapiro kept his promises to regulate Pennsylvania’s fracking industry?

A new report assesses the administration’s progress and makes new recommendations

silhouette of people holding hands by a lake at sunset

An open letter from EPA staff to the American public

“We cannot stand by and allow this to happen. We need to hold this administration accountable.”

wildfire retardants being sprayed by plane

New evidence links heavy metal pollution with wildfire retardants

“The chemical black box” that blankets wildfire-impacted areas is increasingly under scrutiny.

People  sitting in an outdoors table working on a big sign.

Op-ed: Why funding for the environmental justice movement must be anti-racist

We must prioritize minority-serving institutions, BIPOC-led organizations and researchers to lead environmental justice efforts.

joe biden

Biden finalizes long-awaited hydrogen tax credits ahead of Trump presidency

Responses to the new rules have been mixed, and environmental advocates worry that Trump could undermine them.

Op-ed: Toxic prisons teach us that environmental justice needs abolition

Op-ed: Toxic prisons teach us that environmental justice needs abolition

Prisons, jails and detention centers are placed in locations where environmental hazards such as toxic landfills, floods and extreme heat are the norm.

Stay informed: sign up for The Daily Climate newsletter
Top news on climate impacts, solutions, politics, drivers. Delivered to your inbox week days.