The 2017 Atlantic hurricane season was especially destructive, causing over $282 billion in damage, and the 2018 Atlantic hurricane season was notable for its unusually high death toll. The early start to the 2019 hurricane season and extensive flooding in the Midwest serves as a renewed warning that these trends are continuing and will only worsen with climate change. Four of the five costliest hurricanes to hit the nation have occurred since 2012.

The rising number of flood events and their rising losses demonstrate all too clearly two alarming conditions: We as a nation have not done nearly enough to proactively decrease the impact of storms and flooding, and our ability to bounce back—our resilience—needs vast improvement. The nation has to do a far better job taking actions that lessen the devastation wrought by extreme weather and flooding in particular. We know what to do.

Taking measures well in advance of storms, such as implementing hurricane-risk informed building codes and zoning, will lessen the impacts of such climate shocks and aid faster recovery—but it takes real motivation, investment, and long-term commitment. Exposure to floods can be reduced by establishing risk-informed zoning, relocating key assets away from eroding areas and out of flood or fire-prone areas, and enforcing zoning. Communities with climate risk-informed building codes will have more housing stock capable of coping when soaring temperatures, fires, or floods occur. When local building codes offer enhanced protection against the threats of flood disasters, the Department of Homeland Security finds that communities recover faster. Plus, if communities did more to press every business—large and small—to have and test their continuity of operations and disaster recovery plans, the impacts of a disaster would be felt less harshly.

That should be reason enough to start building resilience to flooding now. In November 2017, Moody’s Investor Service provided another when it issued a report highlighting how climate change is a driver of credit risk. The Moody’s report indicated that their credit worthiness rating methodology accounts for the effects of climate change on communities’ economic strength and resilience. By doing so, they provided a clear signal that communities and corporations wishing to keep or achieve high bond ratings need both to reduce their vulnerability to climate change and worsening natural disasters, and enhance their ability to respond and cope better when disasters occur.

The climate change credit risks for public issuers are real and include the obvious physical threats, such as flooding and wind damage. Replacing damaged buildings and infrastructure can increase an issuer’s current capital expenses or long-term debt burden. But the risks go far beyond. The Moody’s report summarized three additional major types of climate change credit risks: economic disruption, health and public safety concerns, and post-disaster population shifts. Economic disruption can occur from property loss and disruption of supply chains that weaken the revenue base. Responding to health and public safety concerns—such as providing emergency access to medical care, food, water, shelter, and power—can add significant and unanticipated stress on an issuer’s budget. Short- and long-term population shifts that can occur after major storms or more frequent intense weather can create unanticipated changes in labor markets and lower productivity, undermining local economies and reducing the local revenue base.

Downplaying climate change over fears it will hurt property values won’t avoid these disruptions. A series of reports released over the last year by First Street Foundation demonstrate that flood-prone coastal properties are losing value. Communities ignoring these implications do so at their own peril. For coastal states, recent devastating hurricanes and floods, eroding property values, and the Moody’s report all serve as clear warning shots across the bow: Failing to take actions now to address seriously the threat of climate change will affect local and regional economies and bond ratings and, therefore, the ability to get low-interest loans.

Risks and Vulnerabilities

An estimated 41 million people in the U.S. live in riverine or coastal floodplains. U.S. coastal areas are responsible for 42 percent of national economic output, according to National Oceanic and Atmospheric Administration. They also contribute 51 million jobs and $2.8 trillion in wages, according to a 2014 National Academy of Science study. In the U.S., floods are the most common and costly natural disaster. Munich Re reports that worldwide, approximately one-third of the economic losses from natural catastrophes are attributable to floods. Climate change will only increase flood damages. So it stands to reason we should all care about promoting the resiliency to flooding.

Even under the most optimistic scenarios for reducing global greenhouse gas emissions, the world already is committed to a substantial amount of the sea level rise by 2100. The Federal Emergency Management Agency (FEMA) estimates that by 2100, 70 percent of the increases in the nation’s flood losses will be attributable to climate change due to more intense precipitation events, sea level rise, and storm surges driven by increasingly powerful storms.

More intense precipitation events already are occurring. Climate modeling now is being used to document whether and the degree to which climate change has aggravated storm conditions. For example, a paper by the Royal Netherlands Meteorological Institute found that the precipitation experienced during Hurricane Harvey was about 15 percent more intense than it would have been in the past and about three times more likely than in pre-industrial times.

Virtually the entire U.S. coast is experiencing rising sea levels to varying extents, and no area of the country is immune to more intense precipitation and flood events. Moody’s, together with reports issued by the National Institute of Building Sciences, provides a regional breakdown of climate threats, economic vulnerabilities, and costs savings from mitigation, which serve as important guideposts for adaptation. For example, the Northeast and Southeast are especially vulnerable to the effects of rising seas on coastal infrastructure. Increased sea levels mean that storm surges can penetrate further inland. In the Northeast, coastal counties account for 68 percent of the region’s GDP and house 88 percent of the region’s population. Mitigating flood risks by implementing and enforcing superior building codes is cost-effective across the Gulf and Atlantic coasts by a factor of over 5:1. When local building codes offer enhanced protection against the threats of flood disasters, the Department of Homeland Security finds that communities recover faster.

Without adaptation, the projected economic effects of forecast storm surges are significant, with average annual property losses projected to increase by between $6 billion and $11 billion by 2100. In the Gulf Coast region alone, 72 percent of ports, 27 percent of major roads, and 9 percent of rail lines exist less than 4 feet above sea level. A storm surge of 23 feet—about the size of Hurricane Katrina’s— could inundate 67 percent of the Gulf’s interstates, 57 percent of arterials, almost half of existing rail miles, 29 airports, and virtually all ports. This is the definition of economic exposure. Around the country, and globally, this picture of asset concentration close to or at sea level is similar and, therefore, the risk profiles unfortunately are similar as well.

Rising Cost of Disasters

We are on an unsustainable path. Moody’s used the EM-DAT International Disaster Database to highlight clearly that natural disasters already are becoming more frequent. From 1978-2016, FEMA paid out more than $59 trillion (in 2016 dollars) for losses associated with significant floods, with 76 percent of those payments occurring after 2004. Even after accounting for inflation, the average paid loss increased by almost 2.5 times since 1978, which is one reason that even before hurricanes Harvey, Irma, and Maria, the National Flood Insurance Program was $25 billion in debt. Munich Re’s NatCatService found that uninsured losses accounted for about half of hurricane losses.

Recognition of the rising costs of disaster spending, and the increasing debt of the National Flood Insurance Program, signal that we need to do better. These concerns, regionally amplified by the Moody’s report, may trigger greater resolve by every level of government to take actions to reduce the impact of storms and increase resilience during recovery efforts.

Only by recognizing climate trends can we begin to assess impacts and take actions to lessen impacts. In a future characterized by greater risks of natural disasters, businesses, cities, and states need to begin now to build economic resilience to climate change. This may be the best bet for coastal businesses to remain viable and communities vibrant. Only by taking actions now can they continue to attract investment and have access to low-cost credit.

Being proactive about climate resiliency also means looking to the future rather than the past. Typically, there are four main types of floods: storm surge, river flooding, pluvial flooding, and flash floods. To date, most of the nation’s focus has been on protecting against extreme flood events, or those with a 1 percent annual probability of occurring. But a new type of flooding is growing in significance: sea level rise.

Already sea level rise is causing sunny day or nuisance flooding in coastal areas, which occurs during the highest high tides or as a result of wind waves in combination with high tides. While not as noticeable as a single catastrophic event, nuisance flooding events are becoming more frequent, and they could become increasingly costly over time. This is due to the cumulative effect of multiple inundations that erode soils, damage roads, buildings, and other infrastructure. Nuisance flooding may even generate property value exposure comparable to or larger than extreme events. In considering how to build business and community resiliency, we now need to consider the costs of these cumulative, smaller hazards.

Adapting to New and Changing Conditions

The Moody’s report and numerous others recognize the importance of local preparation and adaptation. As a nation, we do not invest nearly enough to help communities mitigate the adverse effects of disasters before they happen. Studies by The Wharton School’s Risk Management and Decision Processes Center found that the federal government continues to allocate more risk-reduction funds after disasters than before and noted that President Donald Trump’s FY2019 budget request for FEMA’s Disaster Relief Fund was the lowest since 2014 (although the administration did support supplemental appropriations for disasters). Funding allocated specifically to mitigation in recent disaster appropriations was about one-third of that for general rebuilding.

Of course, FEMA isn’t the only source of federal funding for reducing flood hazards. The U.S. Army Corps of Engineers also has this function—and a backlog of over $60 billion in authorized water resources projects. Housing and Urban Development’s Community Development Block Grant Program disaster grants can fund some risk-reduction activities. Relying solely on federal resilience funding is not going to get communities very far along.

Communities can take significant low-cost actions to reduce their climate change credit risks. Besides implementing and strictly enforcing risk-informed zoning and building codes, they also can jumpstart their resilience efforts by reviewing and aligning their myriad local plans, including economic development, transportation, fire and safety, public health, natural resources, and hazard plans. By connecting often isolated branches of government, technical expertise is integrated, plans become better informed by risks, and synergies are identified. Then funding from various departments can be blended to accomplish projects that simultaneously address multiple community objectives, including building resilience.

The destruction wrought by each disaster offers teachable lessons about vulnerability. Each disaster poses an opportunity for communities to rebuild smarter and lessen the impact of the inevitable next disaster. Rebuilding energy-efficient structures that use renewable power sources has the added benefit of reducing carbon emissions and thus helps to reduce the likelihood of more intense natural disasters in the future.

Because building codes, zoning, and plan implementation can take decades to reach maximum effect, local or state governments need to start down that path now to realize more sustainable and resilient infrastructure. Taking actions now to reduce the future risks from climate change will provide immediate benefits—safer neighborhoods, more jobs, lowered insurance rates, and peace of mind. All of which shore up property values, strengthen revenues, and keep community access to low-cost credit strong. Over the long-term, continued attention to mitigating the risks posed by climate change will help ensure our coasts continue to drive the nation’s economy and provide resilient, vibrant communities.

This article was updated from a Practitioner Insight first published in January 2018.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Shannon Cunniff leads Environmental Defense Fund’s coastal resilience program and has spent the better part of 30 years working for the federal government on water resources, risk management, and environmental policy. At EDF she is working on strategies to enhance communities’ capacity for taking charge of their futures through risk-informed planning and plan implementation. Those strategies include finding ways to expand financing for flood resilience projects and increasing rewards for those that pursue projects that include protection and restoration of natural infrastructure.