Climate change, NY State bonds, and risk

The New York Times points us to a possible first in the state government bond market. My initial reaction was to wonder about flood insurance risk assessment by state, and wether our conversation might go beyond FEMA into more real areas of risk assessment. Mostly we seem to spend our time not avoiding risk but arguing about reactions to risks taken over time.

In the wake of Hurricane Sandy, the administration of Gov. Andrew M. Cuomo has started to caution investors that climate change poses a long-term risk to the state’s finances. .

The warning, which is now appearing in the state’s bond offerings, comes as Mr. Cuomo, a Democrat, continues to urge that public officials come to grips with the frequency of extreme weather and to declare that climate change is a reality.

A spokesman for Mr. Cuomo said he believed New York was the first state to caution investors about climate change. The caution, which cites Hurricane Sandy and Tropical Storms Irene and Lee, is included alongside warnings about other risks like potential cuts in federal spending, unresolved labor negotiations and litigation against the state.

But David Hitchcock, a senior director in the public finance practice at Standard & Poor’s, said climate change was not a criterion in evaluating state finances. “I have a hard time finding a direct relationship for climate change on New York State’s economy at this point,” he said, adding, “It’s not something that’s really on our radar screen right now.”

Emily Raimes, a vice president at Moody’s Investors Service, said “more disclosure is always a good thing.” But she added that most of the risk for local and state governments from powerful storms was mitigated by the presence of the Federal Emergency Management Agency, which provides disaster aid to assist states and local governments.

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