Several drivers are contributing to the rise in expensive severe convective storms: 1) population growth in high-risk areas; 2) non-resilient physical assets; and 3) rising building premiums.
Population growth in areas prone to severe storms has increased asset exposure and the physical assets in harm's way are not designed to withstand high winds or hail. Meanwhile, building premiums to rebuild after severe storms are increasing.
In this edition of The Weekly, we share a condensed version of a new article by Abby Ross, CEO of The Resiliency Company, on the four convictions underpinning the opportunities in the Adaptation Economy.
The Weekly: Winter Storm Fern Exposed Vulnerabilities in U.S. Water Infrastructure
The absence of references to climate change in utilities' bond disclosures suggests we have not systematically assessed how climate hazards could disrupt operations or revenues and, just as concerning, that they aren’t incorporating climate risk into capital planning and investment decisions.
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Each major storm that hits the U.S. serves as a real-world infrastructure audit, providing a stress test for the resilience of different components of the country’s systems. Winter Storm Fern, which pummelled large swaths of the U.S. in January, turned the spotlight on water infrastructure.
Across the central and southern U.S., snow, ice, and sustained cold triggered hundreds of water main breaks, boil-water advisories, and water outages. Another wave of damage struck once the storm finally passed: hundreds of pipes burst in North Texas as cracked pipes unfroze. The issues sketch out a map of where water systems are getting brittle and where there are gaps between physical climate risk and the investment planning needed to close those gaps.
A recent study from Carnegie Mellon University quantifies this problem: Drinking water utilities serving 67 million Americans are located in areas facing high climate risk from flooding, drought, wildfire, and extreme cold. However, more than a third of those utilities’ bond disclosures, which outline the risks associated with lending money to these utilities, don’t mention climate change.
The absence of climate disclosures suggests utilities have not systematically assessed how climate hazards could disrupt operations or revenues and, just as concerning, that they aren’t incorporating climate risk into capital planning and investment decisions. As a result, investors, regulators, and ratepayers are operating blind to threats facing critical infrastructure, and communities remain unprepared for accelerating climate impacts.
This is worrisome in a state like Texas, which has 74 drinking water utilities, less than 5% of which mention climate change in their bond statements. When investors buy municipal bonds from these utilities, they’re essentially betting on infrastructure that may not withstand the next climate disaster, without being told that risk even exists. And utilities likely haven’t modeled how extreme heat, drought, or flooding could strain treatment capacity or increase costs.
Another example is Jackson, Mississippi, classified by the CMU study as “High Priority,” meaning high climate risk with no climate disclosure. In 2022, flooding coupled with aging infrastructure left 180,000 residents without clean drinking water after the city’s main water treatment plant failed. That facility had experienced “recent flooding” and “operational failures,” yet climate change was not referenced in the bonds that financed the system.
Fortunately, practical opportunities exist for various ecosystem stakeholders to help close the gap between physical risk and financial planning:
Ratings agencies can incorporate physical climate risk into municipal bond ratings, even for short-term debt, to better reflect long-term system vulnerability and align borrowing costs with actual risk exposure.
States can mandate climate risk assessments for drinking water utilities, particularly in high-risk regions like Texas, where awareness remains low. As an example, the California State Water Board adopted a resolution in 2017 to “integrate climate change comprehensively into its programs and decisionmaking, including drinking water regulation, water quality initiatives, and financial assistance.”
Federal and state agencies can require formal climate adaptation planning and provide accessible, high-quality risk data to support informed decision-making. According to the Georgetown Climate Center, 19 states have state-led climate adaptation plans already, many of which have “Low Priority” water utilities, as labeled by the CMU study.
Public infrastructure funding can be prioritized using climate risk metrics, directing planning support and capital toward “High Priority” utilities.
Winter Storm Fern demonstrated a critical disconnect: We know where climate risks threaten water infrastructure, but that knowledge hasn’t translated into the financial planning and capital investment needed to protect those systems. Solutions exist. The key is to implement those solutions before the next climate disaster hits.
Congress Ends Partial Shutdown, Extends NFIP Through 2026 | National Mortgage Professional | A last-minute deal to avert a partial government shutdown included a short-term extension of the National Flood Insurance Program, offering another few months of stability for homebuyers, lenders, and insurers.
New Bill Aims to Make California FAIR Plan Cover All Insurance Risks, Not Just Fire | San Francisco Chronicle | The "Make It FAIR Act" would require the state's insurer of last resort to provide comprehensive homeowners coverage beyond just fire damage. FAIR Plan representatives are pushing back, saying that an expanded mandate could strain the market further.
Resilience at Scale Means the Municipal Bond Market | CA FWD | Matt Posner of The Resiliency Company argues that the municipal bond market, which issues over $1 trillion annually, is the capital system with the scale to meaningfully fund climate resilience. If just 10% of annual issuance targeted resilience, it would unlock $50 billion per year.
‘A Disaster Waiting to Happen’: How the Fracking Boom Put an Oil Field in the Guadalupe River Floodplain | Inside Climate News | Rapid oil and gas development along the Guadalupe River is driving growth in flood-prone areas of Central Texas, even as climate change intensifies rainfall in the area. Local officials are struggling to balance economic pressure with the long-term costs of leaving infrastructure in harm’s way.
Read more about resilient public infrastructure and government solutions on The Epicenter here.
Real Estate & Construction
HAR.com Drops Plan to Add Flood Risk to Texas Home Listings 'Out of Nowhere' Near Launch | Houston Chronicle | The Houston Association of Realtors postponed plans to display flood risk ratings on property listings after pushback from members. It’s the latest example of tension between climate risk transparency and realtors’ concern that risk data could unjustly stigmatize properties.
JLL: High Insurance Premiums for Climate Risks Threaten Real Estate Values | Asset Physics | Soaring insurance premiums tied to climate hazards are affecting commercial property values, according to new analysis from JLL and Munich Re. Investors and developers are treating climate vulnerability as a core factor, on par with location and rent growth.
Read more about resilient real estate on The Epicenter here.
The Global Elite Want To Save Us From Our "Wildfire Problem." Should We Let Them? | The Hotshot Wake Up | A Davos policy paper outlines how global elites plan to tackle wildfire challenges. This piece digs into the good, the bad, and the thought-provoking in the paper’s proposals, and questions whether a top-down, surveillance-heavy approach can effectively address the problem.
Read more about private investment on The Epicenter here.
The Evolution of Home Rebuilding Catalogs: Lessons from Katrina, Santa Rosa, and Lahaina | Alexis M. Pelosi and Robin Keegan | The lack of standard home rebuilding playbooks, combined with the uneven delivery of federal disaster recovery funding, has led to fragmented rebuilding efforts over the past few decades. However, disaster recovery is developing more systematic approaches using pre-approved home plan catalogs.
Beyond the Rainy-Day Fund: A New Model for a Fiscally Stressed Nation | Alexis Pelosi | States are seeing their emergency reserves shrink for the first time since the Great Recession. The path forward is a new two-pronged, pro-growth, pro-resilience model that expands the state’s economic base while simultaneously modernizing the financial tools used to protect it.
Active Construction Sites Are Climate Risk Blind Spots: Lessons from Hurricane Ian | The Epicenter Editors | In an interview with The Epicenter, Joe Rozza of Ryan Companies explains what happens when a major storm hits mid-construction and why CRE leaders should give as much weight to their works in process as they do to projects on either end of the building spectrum.
The Statistic of the Week
2.1 trillion gallons
In the U.S., about 2.1 trillion gallons of water are lost every year in water main breaks, partially due to aging infrastructure.
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The Epicenter helps decision makers understand climate risks and discover viable resilience solutions. The Epicenter is an affiliated publication of The Resiliency Company, a 501(c)3 nonprofit dedicated to inspiring and empowering humanity to adapt to the accelerating challenges of the next 100+ years.
The federal government's retreat from climate adaptation has created a gap in data, funding, and coordination, but a new decentralized ecosystem of nonprofits, state governments, and coalitions is stepping up to fill the void and may prove more resilient to political disruption in the long run.
As federal disaster support shrinks, resilience districts offer local governments a promising new financing tool to fund climate adaptation on their own terms.
Resilience districts give local governments a new financing mechanism to fund climate adaptation, but their success depends on applying a forward-looking, risk-informed approach rather than defaulting to traditional bond financing logic.
The Epicenter’s three-part home catalogs series from Alexis M. Pelosi and Robin Keegan describes how we arrived at the current moment and explores what it means for the future of housing after disasters and in communities facing disinvestment, outdated zoning, or housing supply constraints.
