An inconvenient cost: The effects of climate change on municipal bonds
Journal of Financial Economics, 2020, vol. 135, issue 2, 468-482
Counties more likely to be affected by climate change pay more in underwriting fees and initial yields to issue long-term municipal bonds compared to counties unlikely to be affected by climate change. This difference disappears when comparing short-term municipal bonds, implying the market prices climate change risks for long-term securities only. Higher issuance costs for climate risk counties are driven by bonds with lower credit ratings. Investor attention is a driving factor, as the difference in issuance costs on bonds issued by climate and nonclimate affected counties increases after the release of the 2006 Stern Review on climate change.
Keywords: Climate change; Municipal bonds; Sea level rise; Investor attention (search for similar items in EconPapers)
JEL-codes: G14 G24 H74 Q54 (search for similar items in EconPapers)
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