Resilient infrastructure key for climate risks, but cities slow to adapt

As weather events become more frequent and intense, engineers say building resilient infrastructure may cost more up front, but will mitigate climate risks and save money over the long term. Cities, despite being on the frontlines of vulnerability to climate risks, say funding remains a barrier.

In a survey on municipal infrastructure resilience and its obstacles released last Friday, the National League of Cities reported that only 24% of the responding municipalities are using climate data in their capital planning. Seventy percent said they have not conducted a climate-risk assessments of their infrastructure.

That’s even though 96% of the respondents experienced stormwater flooding and 53% have faced extreme heat and cold weather events.

Lack of funding remains the biggest obstacle, the cities said, although many plan to apply this year for the record level of federal grants provided by the Biden administration’s infrastructure and climate packages.

Building resilient infrastructure from roads to utilities is crucial to mitigating climate-related credit risks, but cities say they lack adequate funding.

Alejandro Cegarra/Bloomberg

The risks that climate change-driven extreme weather poses to municipal bonds and credits is increasingly being taken seriously by market participants from rating analysts to regulators and investors.

Issuers have mostly failed to feel the heat from the muni market, which rarely penalizes credits most exposed to climate risk. That’s in contrast to the real estate market, where property insurers have priced in risk for decades and now are starting to pull back from the most vulnerable markets, which some say will eventually hurt tax bases.

While issuers seem slow to include climate risk in their capital planning, engineers who design the infrastructure are very focused on it, said Darren Olson, a Chicago-based engineer and stormwater consultant and chair of the American Society of Civil Engineer’s Committee on American Infrastructure.

“Is it going to cost more to build resilient infrastructure? In a lot of cases, it will cost more in the short term,” Olson said. “But long term, when you think about all these assets, if we’re building them more resilient, they’re going to last longer and it’s going to cost us less money.”

The number of so-called billion-dollar weather and climate disasters per year has increased from an average of 3.3 events per year in the 1980s to an average of 22 events per year in the 2020s, according to a 2024 report to Congress from the National Oceanic and Atmospheric Administration. “In 2023 alone, the U.S. logged a record 28 severe weather events that crossed the billion-dollar damage threshold,” the NOAA said.

Local rainfall standards offer a clue whether a city or state is taking resilience seriously, he said. Many areas, like the Pacific Northwest, have outdated standards, which affects the design of everything from bridges to roads to storm systems, Olson said.

“For engineers, the thing on our radar screen the most due to climate change is increased and intense precipitation. That’s what we talk about when we talk about building resilient infrastructure,” Olson said. “If I wanted to know if my community or state is building resilient infrastructure, the first thing I would look at is the rainfall standards.”

Congress has directed the NOAA to update its precipitation standards for the entire country, which would require locals to use those standards, Olson noted.

First Street Foundation, a physical climate risk data provider, in a report last June noted that NOAA’s new standards are expected to be released in 2027. That is one year after the $1.2 trillion Infrastructure Investment and Jobs Act – and the billions it brings for climate infrastructure – will have expired, the firm said.

The IIJA funding marks “a once-in-a-generation opportunity to make communities safer and to modernize America’s infrastructure so that it is more resilient to our rapidly changing climate,” Matthew Eby, First Street’s founder and executive director said in the report. “The fact that the nation will not have the most accurate estimates of extreme precipitation likelihoods available at the time of the design of these projects means that many of them will be out of date on the day they are opened to the public.”

The energy and power sector is also vulnerable to climate risk — and over the next five to 25 years, rising temperatures will require the construction of new power generation that would cost ratepayers up to $12 billion per year, according to the NOAA.

The 2022 Inflation Reduction Act, which provides $400 billion over 10 years for climate resilience and clean energy projects, has had a positive impact so far in moving the country toward the administration’s zero-emission goals, and that helps mitigate climate risk, said Dan Aschenbach of AGVP Advisory, which recently partnered with Abacus Infrastructure Partners to form consulting firm MFS Associates.

States and cities are starting to “ramp up” their participation in clean energy programs, Aschenbach said, naming several examples like the Lansing Board of Water & Light and Port of Duluth.

“The resiliency of the infrastructure is an issue that’s very important to cities today, given what we’ve seen in the recent past with some towns getting very severely impacted,” said Aschenbach, who focuses on municipal franchise agreements that are about to expire, as well as municipalization feasibility studies and assessment of potential owned generation.

New power agreements may help the cities align resiliency and clean-energy goals, for example by building power lines underground, he said.

“There are a lot of roles that the municipal government didn’t have before that have become more important,” Aschenbach said.

The CDP, a nonprofit that runs an environmental disclosure system, said in its 2023 global snapshot that the U.S. leads in the number of publicly disclosed climate-related infrastructure projects.

Across the globe in 2023, 636 cities across 86 countries publicly disclosed 2,346 climate-related infrastructure projects, the firm said. That includes 434 projects in the U.S.

“Many projects are relatively small-scale, with 40% of projects reporting cost estimates below $500,000,” the firm said. “Some 74% of these projects were disclosed by small and medium-sized cities with less than 500,000 inhabitants.”

The NLC survey, conducted last fall, said it is “clear that the responding cities are facing myriad challenges when it comes to improving the condition and resilience of their infrastructure in the face of extreme weather events.” The report noted that only 46 of the 1,070 municipal governments that received the survey responded, a low number that “may indicate a reluctance or lack of readiness to engage with the issue of infrastructure resilience.”

Sixty percent of the survey respondents named lack of funding as the highest barrier to improving infrastructure resilience, followed by implementation capacity, lack of “public buy-in,” and technological challenges.  

But 67% of the cities said they plan to apply for federal infrastructure competitive grants before fiscal year 2026, the NLC said.

The survey found that local capital budgets was the most utilized funding source, named by 91% of cities, while 80% of cities named local operating budgets and 70% named state funding programs.

Federal funds provided by the state or metropolitan planning organization was a form of funding for 63% of cities, with another 47% naming federal competitive direct grants and state competitive direct grants.

On the private side, infrastructure investors are increasingly eager to put their money into resilient projects, said David Quam, senior advisor at the Global Infrastructure Investor Association, at a recent ASCE event.

“Many of these projects are long term and when the [design-build-finance-operate-maintain agreement] is 30 years, resiliency is paramount,” Quam said. “The longer it can last, the less money you have to put into repairs later on, the more money you can make, and the better the asset is.”

Issuers that are incorporating climate risk into capital plans need to inform the public, said Roger Millar, Washington State’s Transportation Secretary, speaking at the same event.

“As engineers it’s incumbent on us to share that with the public when we decide to construct something to be resilient versus when we decide not to,” said Millar, an engineer.

His agency is now protecting all its structures against a 1,000-year storm event, he said. It may be more costly, but the final result will be protective.

“What we’re looking at is designing and building for a future that we can contemplate being out there,” he said.

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