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Moody’s Geographic Ratings

Investors can now see whether a company they’re considering as an investment is located in a climate-friendly or risky area in the U.S., Europe, and other regions around the world.

Photo Courtesy Phillip Flores

The rating service Moody’s ESG Solutions recently expanded its geographical coverage of climate risks such as floods, hurricanes, typhoons, heat, sea-level rise, water shortage, and wildfires to sub-sovereign areas. In the U.S., data is now available at the state, county, urban, metropolitan, and micropolitan levels, as well as by zip code. It covers U.S. cities and counties with at least $500 million in outstanding debt.

In Europe, investors can get coverage of all three country subdivisions. Elsewhere, it provides data on global states and provinces, as well as 3,300 urban areas. The rating agency already scored 200 sovereigns with 42 hazard metrics.

“Climate emergencies are already disrupting communities, economies, and supply chains—and they are going to increase in severity and frequency,” said Emilie Mazzacurati, global head of climate solutions at Moody’s ESG Solutions Group.

“Mitigating loss requires a forward-looking view on which geographical areas are most exposed to specific hazards. Our new sub-sovereign dataset enables users to better understand the level of climate risk facing their assets and investments based on location, informing proactive risk management and resilience investment.”

Moody’s used satellite images to overlay granular climate data with population and economic information, and it matched locations of economic activity and people to areas that exhibited extreme weather conditions. The benefit of having access to these scores is that fund and asset managers and other investors can get an accurate picture of how extreme weather can impact regions, communities, and companies located in those areas.

Among the findings were that 26% of U.S. zip codes are highly exposed to floods, while 21% of Europe’s smaller regions faced excessive heat risk.

In addition, the rating agency recently expanded its ESG issuer profile and credit impact scores to U.S. cities and counties with at least $500 million in outstanding debt. The scores use a five-point scale. Issuer profile scores assess exposure to material ESG credit risks for rated-debt issuers, and credit impact scores show the impact of ESG factors on their credit ratings.

The scores showed that more than 40% of U.S. cities present a negative or highly negative exposure to environmental credit considerations. Forty percent of U.S. counties scored moderately negative.

“Physical climate risk – including hurricanes, sea-level rise, wildfires, and drought – is the most prevalent environmental credit consideration for most of the large U.S. cities and counties we scored,” says Adebola Kushimo, vice president and senior credit officer at Moody’s Investors Service.

Photo Courtesy Marcus Kauffman

U.S. cities and counties showed better scores when it comes to social factors. They had low to neutral exposure in that area.

“Demographic trends and labor and income, heavily influential social considerations in terms of the economy, are generally sound for U.S. cities and counties,” says Coley Anderson, vice president, and analyst at Moody’s Investors Service.

On the governance side, the scores were very positive for large U.S. counties, highlighting policy credibility and effectiveness, as well as budget management. The scores were also generally strong for large U.S. cities.

“Overall, ESG considerations have a neutral to low credit impact on most U.S. cities and counties with at least $500 million in debt, according to Moody’s new scores,” noted the research announcement.


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