US state and local governments need to improve climate reporting to maintain access to the capital required to fund resilient infrastructure and vital services, according to new guidance. Investor network Ceres has released a framework aimed at helping governing entities to better manage and disclose climate risks to investors in the US$4 trillion municipal bond market. The report follows a spate of climate-related municipal bond defaults and credit downgrades, including those caused by the Los Angeles wildfires where S&P downgraded bonds due to concerns about future climate risks. Rising sea levels, hurricanes, floods, wildfires, and extreme heat increasingly threaten municipal revenues while creating significant adaptation costs, noted Ceres. The report cites forecasts that climate adaptation projects could double municipal debt issuance over the next decade, making transparent disclosure “even more critical” for municipalities seeking to fund resilience investments. The Ceres framework proposes a layered approach to municipal climate risk disclosure and resilience planning, recommending specific practices for financial statements, bond issuance documents, climate action reporting and climate resilience planning. It also references best practices from municipal authorities, including Miami-Dade County Water’s 2024 statement for water revenue bonds, which provided comprehensive disclosure of climate risks and adaptation efforts, with reference to its Sea Level Rise Strategy and other initiatives. “As extreme weather events threaten infrastructure, property values, and government revenues, climate disclosure is an opportunity for municipal, county, and state governments to be better prepared to meet these risks,” said Steven Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets.
