Local government disclosures regarding tax collections, outstanding debt, and any pension plans have always been important for complying with applicable disclosure rules and regulations. Climate and cybersecurity risks are two newer topics that have found their way into local government offering documents. Although newer topics, in many cases, they’ve already become too formulaic and standardized. As a result, the disclosures on these topics fail to provide issuer-specific information that investors are looking for.
While climate risks have typically been thought of as a problem for our friends on the coast, Hurricane Helene and its effects have shown us that no one is immune to the increased prevalence of severe weather events. A 2024 report from the NOAA stated that there have been 403 weather and climate disasters in the United State with damages greater than $1 billion since 1980, with a total cost nearing $3 trillion. In 2024 alone, there were 27.
Since local governments obviously can’t pick up their things and move, unlike individuals or private companies, climate risks pose a unique challenge. As a result, disclosing relevant climate risks and proactive resiliency practices will be key in the coming years to ensure access to necessary capital markets. A recent Ceres guide to strengthening your climate disclosure had a chart that you might find helpful. You can read the whole report here.
While the cybersecurity challenges faced by municipalities are not unique like those presented by extreme weather and climate events, they exist just the same. NFMA states that although issuers are not subject to the same SEC requirements as public companies, they should be held to the same disclosure responsibilities. Although NFMA acknowledges that disclosure may need to be limited in cases where an active cybersecurity incident has occurred or is occurring so as to not provide any aid to bad actors, NFMA says that issuers should make their best effort to ensure disclosure as thoroughly as possible. We’ve formed our own checklist from the NFMA report that we think best summarizes the responsibilities held by issuers when preparing cybersecurity disclosure materials. To read the full NFMA white paper, click here.
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