Analyzing climate risk disclosure gaps in municipal bond markets
- Increasing severe weather events are threatening the U.S. municipal bond market.
- Our joint research with Ceres reveals that municipal bond offerings frequently fail to provide investors with detailed, actionable climate risk disclosures.
- By adopting standardized frameworks, coordinating with regional partners, and focusing on forward-looking data, bond issuers can successfully translate climate risks into measurable metrics.
Extreme weather is no longer a distant threat. As wildfires, droughts, and severe storms increase in frequency and intensity, municipalities are facing risks that directly threaten their infrastructure and long-term fiscal stability. In 2025, the U.S. was hit by 23 separate billion-dollar disasters, totaling more than $115 billion in damages.1
This growing wave of climate events puts the $4.4 trillion municipal bond market – which funds more than 70% of U.S. infrastructure and disaster relief – at risk.2 If severe weather erodes local tax revenues, a municipality’s ability to repay its debts comes into question.
Municipal issuers are starting to respond to these market signals. The share of bond offerings that mention climate change jumped from 16.5% in 2017 to 53.5% in 2025.3 But there’s a catch: an increase in the quantity of climate risk disclosures doesn’t mean an increase in quality.
Putting disclosures to the test
Cotality partnered with Ceres to answer one key question: Are municipal bond issuers giving investors the information they need to assess and price financial risks? Using Cotality's Climate Risk Analytics to identify the 20 most climate-exposed large U.S. metro areas, Ceres analyzed 60 recent municipal bond offering documents to find out.
“Working with Cotality gave us the opportunity to combine leading climate risk analytics with an investor-focused review of municipal bond disclosures,” said Steven Rothstein, Chief Program Office at Ceres. “Our research shows investors increasingly expect information on specific hazards facing a community and the actions being taken to manage those risks. Municipalities that communicate those efforts clearly in their official statements are better positioned to strengthen their own risk management and compete more effectively for capital."
Without clear disclosures, investors are at risk. And because the municipal bond market has historically been one of the most stable segments of U.S. capital markets, this can create ripples across the entire financial system.
Where climate risk disclosure gaps exist
Our research revealed that current municipal bond disclosures fail to consistently translate underlying risks into useful data for investors. Here’s where the biggest gaps exist:
- Hiding the good news: While many issuers are making investments to manage climate-related risks – such as relocating wastewater treatment plants out of floodplains – these efforts aren’t always reflected in bond offering documents.
- Relying on generic boilerplates: Most issuers rely on generic language for climate-related disclosures. They frequently fail to explain the specific perils that are most relevant to their location – even when those risks are well understood.
- Missing the metrics: When issuers do provide disclosures, they often skip the most important parts: Governance and Metrics. These sections clarify who is accountable for managing climate risk and how those risks are integrated into the issuer’s budget. Without this quantifiable data, investors can’t effectively measure risk.
- Stuck in the past: Most bond offerings focus heavily on past disasters with a standard caveat that the future is uncertain. They don’t provide forward-looking analysis for future disasters.
- Inconsistent storytelling: Issuers in the same region sometimes report different risk profiles. For example, a 2024 bond offering from a county in a highly flood-exposed area explicitly linked increased rainfall to future capital needs.4 But a 2023 bond from a Water Works within the same metro area made no mention of these vulnerabilities.5
Our recommendations for bond issuers
While it’s obvious there is work to be done, the path forward is clear. To turn risk into resilience, municipal issuers must improve their transparency in the following ways:
- Show your work: If you have sustainability and resilience programs in place, feature them prominently in your official statements.
- Get specific: Drop the generic language and replace it with specific, local risk data. Pair it with details on your risk mitigation strategies.
- Embrace the framework: Adopt the Task Force on Climate-Related Financial Disclosures (TCFD) framework. Define who oversees climate risk management, describe their strategy, and establish quantifiable metrics.
- Look to the future: Pair your material climate risks with forward-looking projections to model future scenarios.
- Team up: Coordinate with other issuers in your metro area. By pooling resources for regional risk assessments, you can reduce the heavy lifting while raising the standard for everyone.
Get the full report
Transparent climate risk disclosure isn’t just about compliance. It helps investors make more informed decisions, and it enables municipalities to highlight how they are managing long-term risks.
For a deeper dive into our findings, including best practices and pitfalls for bond issuers, read the full report. To learn more about how future risks could impact your portfolio, reach out to our team.
