346 AAssignmentsReading #7 BRT

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On the third floor of the building that houses the US Treasury Department hang portraits of the seventy- six former secretaries of the treasury, starting with Alexander Hamilton. The men in all the paintings are wearing jackets, some even waistcoats, except for one. The portrait of Hank Paulson (Figure 4), who served under President George W. Bush, is of a man standing in his shirtsleeves, shirt slightly untucked, sleeves rolled up, hands in his pockets, a look of amused puzzlement on his face. Paulson is unique not only for rejecting a formal pose. History will best remember him for having engineered the Bush Administration’s response to the 2008 global financial crisis and for persuading Congress to approve the controversial Troubled Asset Relief Program. Depending on your political persuasion, the program either bailed out crooked banks at taxpayers’ expense and should never have happened, or it heroically averted another Great Depression, or both.

Less well known is that Paulson is one of a small handful of prominent Republicans who favor aggressive action to combat cli- mate change. In 2014, long after leaving the Treasury Department, Paulson was asked about his personal strategy for talking to fellow Republicans skeptical of efforts to cut greenhouse- gas emissions.

Building a Resilient Tomorrow: How to Prepare for the Coming Climate Disruption. Alice C. Hill and Leonardo Martinez-Diaz, Oxford University Press (2020). © Oxford University Press. DOI: 10.1093/oso/9780190909345.003.0005

Figure 4 Portrait of Hank Paulson, by Aaron Shikler, 2010. Source: US Department of the Treasury.

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Paulson knew only too well that bank bailouts— the use of public funds to rescue troubled financial institutions from bankruptcy— are deeply unpopular with the American public. Yet, he explained, no one who wants a future in politics can afford to turn his or her back on a disaster- stricken community. When a major natural disaster strikes, the government steps in and pays for a large share of the uninsured losses. As climate change makes extreme weather more frequent and natural disasters more severe, Paulson continued, the losses will stack up. Government debt will get bigger and bigger. “Climate bailouts,” as Paulson termed the use of public funds to help affected communi- ties recover and rebuild after a natural disaster, will become a regular fixture of national life. So if Republicans care about limited govern- ment, Paulson concluded, they should care about controlling climate change before it results in never- ending climate bailouts.

Recent history suggests Paulson was right. Between 2005 and 2008, Congress appropriated almost $130 billion to pay for natural- disaster damages, caused mostly by Hurricanes Katrina, Rita, and Wilma.1 After Superstorm Sandy struck, in 2012, the government paid out over $50 billion. And following devastating wildfires and Hurricanes Harvey, Maria, and Irma, in 2017, Congress made avail- able almost $140 billion in emergency funding. Congress borrowed most of this money, adding to the growing national debt.

Even for the largest economy in the world, ever- larger climate bailouts are not a responsible solution to handling present and fu- ture climate impacts. They will cut deeper and deeper into vital areas of public spending, such as infrastructure, education, and health care. They will feed a spiral of borrowing, leading to higher financing costs for the government and higher taxes. Escalating climate bailouts will accelerate the declining fiscal health of the country, which will make policy trade- offs a lot tougher for the

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next generation of Americans. For this reason, the US Government Accountability Office (GAO), a trusted government watchdog that works for Congress, identified climate change as a “significant fi- nancial risk to the federal government.”2 In 2013, the GAO added climate change to its annual list of issues that constitute the highest fiscal risk to the US government. As of this writing, climate change is still on the list. For other nations, especially those in the world’s poorer regions, borrowing on this scale is not an option. The tra- ditional approaches, hoping that foreign aid will flow sufficiently quickly and in adequate amounts or otherwise leaving needs unad- dressed, are not good options either.

In the coming years, governments everywhere, including in the United States, will have to raise unprecedented amounts of money to cope with the impacts of climate change. Precise estimates are hard to find, but one review of the literature suggests that countries should already be spending between 0.67 percent and 1.25 per- cent of their annual gross domestic product (GDP) on resilience.3 Globally, that means hundreds of billions of dollars per year, and currently, countries may be underspending on resilience by as much as 70 percent.4

How can communities raise the money needed, and how can they do so while keeping the financial strain as low as possible? They can fund resilience the old- fashioned way, through tax revenue, bor- rowing, and buying reinsurance. For developing countries, securing more international assistance will be necessary. But governments must also deploy new ideas, including those we discuss in this chapter— setting up special reserve funds, using value capture, raising funds from carbon taxes and cap- and- trade mechanisms, and issuing green and catastrophe bonds. Climate bailouts, even for the richest nations, are not a smart way to grapple with the effects of climate change. We can and must do better.

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TAXING OUR WAY TO RESILIENCE

Miami Mayor Tomás Regalado was not always an advocate for cli- mate resilience. A grizzled Republican with over twenty years in Miami electoral politics, he focused his political message on prac- tical, pocketbook issues. “Do I have a vision?” he repeated when the press asked him the question in 2013: “Keep taxes down. Reduce the size of government. Fix the potholes. Fix the streets. Pick up the garbage.”5 According to the Miami Herald, it was Regalado’s son, an underwater photographer named José, who made a point of sitting down with his father at four or five o’clock in the morning and, over cups of Cuban coffee, sharing articles and exchanging ideas about cli- mate change. By 2017, the mayor had come to terms with the fact that his city had become emblematic of the impacts of climate change.

With little time left in his last term in office, Regalado threw his political weight behind an uncharacteristic initiative— raising taxes to pay for resilience. Miami would borrow $400 million from the market by issuing bonds, and through a referendum, city residents would agree to increase their taxes to pay it back, with interest. Authorities would dedicate almost half the money to upgrading storm drains, installing flood pumps, and building or strengthening seawalls. There was no effort to hide the bonds’ climate- resilience objectives. The initiative was known as the Miami Forever Bond. “The city eventually has to deal with this,” Regalado said, refer- ring to the growing problem of flooded streets. “And the only way the city can do that is with the bonds.”6 Voters approved the refer- endum, with 55 percent of them supporting the measure.

Taxes are the most obvious and old- fashioned way to finance investments in climate resilience. Governments can increase ge- neral taxes, such as income or sales taxes, or they can introduce taxes targeted for resilience measures. In 2016, for example, voters

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in the San Francisco Bay Area approved by a wide margin an annual, $12 property tax to restore the bay’s natural wetlands. This green infrastructure should provide significant flood protection benefits by acting as a buffer as sea levels continue to rise. A year later, San Francisco voters overwhelmingly approved, by an 80 percent margin, an initiative to issue $425 million in bonds to strengthen the Embarcadero seawall. The project will protect $100 billion worth of property from seismic risk, as well as from the rising waters. Voters in Harris County, Texas, whose seat is the city of Houston, voted for a tax increase in 2018 to finance a $2.5 billion “flood bond,” the pro- ceeds of which will pay for flood mapping, an improved flood early- warning system, and infrastructure to expedite drainage.

Some developing countries and small island states are doing the same thing. The climate- vulnerable Pacific island of Fiji adopted in 2017 an Environment and Climate Adaptation Levy (ECAL), a 10 percent tax on a wide range of items, from plastic bags to restau- rant meals to movie tickets. Fiji’s government expects that ECAL revenues will exceed $47 million per year, or about 4 percent of Fiji’s total tax revenue. It has committed to using the money for climate- resilience projects.7

In many places, from the United Kingdom to several US states, governments are using taxpayer resources to capitalize green banks. These are financial institutions with special mandates to finance projects that generate environmental benefits. So far, green banks have focused most of their climate- related lending on efforts to cut emissions, and very little money has gone to building resilience. This is a missed opportunity; green bank cap- ital could go a long way in helping communities prepare for cli- mate impacts.

As a strategy to raise money for climate resilience, taxes have limits. Raising taxes is politically challenging, even if politicians

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promise to dedicate the revenue to cope with climate change impacts. Some taxes may be regressive, hitting the poor dispropor- tionately. Also, one- off tax measures and bond issues will not de- liver the sustained funding needed to meet the resilience challenge. Policymakers will need to combine taxes with other strategies for raising cash to pay for resilience.

PAYING OUR FAIR SHARE

New York City’s subway acts as the heart and arteries that keep the city running. But the system has not kept up with the city’s growth and needs renovation and expansion. In their search for ways to finance the revitalization, city and state officials have proposed one mechanism, known as “value capture,” to raise funds for new subway- related projects. This strategy can potentially enable com- munities to invest in climate resilience projects as well.

The concept is straightforward. Everyone should pay his or her “fair share” of the cost of new infrastructure that brings very local- ized benefits to their communities. In the case of a subway line, for instance, proximity to a station improves property values; the closer a building is located to a subway station, the more convenient it is for residents and workers to access, and the more valuable the property becomes. In Manhattan’s main business corridors, for ex- ample, proximity to the subway adds an estimated $4.58 per square foot to the value of commercial property.8 So, the argument runs, it makes sense for those who derive direct benefits from proximity to the subway to share some of the costs above and beyond what they contribute in general taxes. This approach is best suited to paying for renovations to a particular station or for the extension of a subway line to reach a particular community. General upgrades to

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the entire system, which benefit everyone, are more appropriately funded from general tax revenue.

How could New York put value capture to work? New York authorities have proposed conducting before- and- after assessments of neighborhood property values whenever the city plans to build a new transportation project costing more than $100 million, such as a subway line extension. Authorities would calculate the difference in property values before and after the project is completed, as well as the difference in property- tax revenue. The government would then transfer most of the estimated gain in tax revenue to the transit agency to pay for the improvement. A similar approach has been considered to fund improvements to the Paris Metro.9

Communities could apply similar strategies to climate resilience projects. For example, the value of a property protected from storm surge by a new seawall or natural barrier typically should be higher than the value of a similarly situated property that does not have such protection. Authorities can estimate the value difference be- tween comparable properties with protection and those without it. Some of that difference can then be “captured” through increased taxes on the benefiting properties. This is a big undertaking; making the calculations is not easy. They will also be hotly contested by pro- perty owners and they raise issues of equity. But given the potential benefits of this approach, it’s an experiment worth trying.

PAYING WITH CARBON

In 2005, in a remarkable feat of climate leadership, European leaders launched the European Union Emissions Trading System (EU ETS). A cornerstone of Europe’s efforts to fight climate change, the EU ETS applies the concept of “cap and trade” to a significant

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swath of industry. Like other cap- and- trade systems, it works like this: The government limits the total amount of permissible carbon emissions and then issues permits that allow permit holders to le- gally emit a certain amount of carbon. Businesses can buy and sell permits in a special market. Companies that can reduce their emissions relatively cheaply will choose to do so rather than to buy permits, whereas companies for which cutting emissions is expen- sive will prefer to buy permits instead. As the government reduces the total amount of permissible emissions over time, the price of permits will increase, pushing more and more emitters to cut emis- sions. When the system works as intended, it reduces overall emis- sions and generates revenue from the sale of permits in the process.

Since the purpose of the system is to fight climate change, it is fitting that the government should use at least some of the pro- ceeds from the sale of the permits to prepare for its impacts. But this has not been the case so far. Between 2013 and 2015, the EU ETS raised about €12 billion (about $14 billion). The EU spent most of the money on emissions- reduction efforts; only a miniscule amount was spent on climate resilience in Europe and beyond.10 In the United States, California’s cap- and- trade mechanism generated about $4.5 billion between 2012 and 2016. Some of the activities that were funded with this money benefited resilience indirectly. But the state has yet to designate any of this money for resilience activities.11 The Regional Greenhouse Gas Initiative (RGGI) is a regional cap- and- trade system run by a group of northeastern US states. It has raised at least $2.6 billion. Of all the RGGI states, only Delaware appears to have used a portion of its share to build resil- ience, in this case for coastal protection and flood prevention.12

Governments aren’t planning to use money raised through carbon taxes for resilience either. Carbon taxes are fees charged by the government and paid by the emitters of greenhouse gases; they

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are typically levied on each ton of carbon emitted. In 2018, voters in Washington state considered one of the first referendums on a carbon tax to be held in the United States. One of the most pro- gressive climate efforts in the country, Initiative 1631 would have raised an estimated $2.2 billion in the first five years. Yet less than one- twentieth of the revenues would have gone to assist commu- nities in buffering against climate impacts.13 In any event, the refer- endum failed to get the necessary votes to pass. As the world adopts more carbon taxes and cap- and- trade mechanisms to cut emissions, putting aside some of those revenues for resilience will generate sig- nificant funding streams that can enable communities to prepare for the impacts of climate change.

GREEN BONDS FOR RESILIENCE

In 2007, Aldo Romani was head of the investor relations team at the European Investment Bank (EIB), the world’s largest multilat- eral development bank. Nestled in Luxembourg, on a campus of well- tended gardens and contemporary art sculptures, the bank serves as the public policy bank for European Union member states. For an EU member country that needs financing for an EU policy priority, the EIB is one of the first stops. At the time, the EU had set out climate- related targets for reducing greenhouse- gas emis- sions, boosting renewables, and increasing energy efficiency. But implementing the plan, known as “20- 20- 20,” after the percentage targets set in each category, required funding.

The challenge of raising money for the initiative fell partly on Romani’s shoulders. The bank could easily issue bonds to raise funds from the usual suspects, but Romani hoped to attract new investors. His answer was to market a new line of securities that would appeal

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to an emerging class of “green” investors. The securities were called Climate Awareness Bonds, and they promised investors that their money would be invested only in green projects, such as renewable energy and energy efficiency. Back then, selling bonds expressly for climate activities was still a somewhat edgy, untested strategy, so the bank initially issued bonds worth a relatively modest €600 mil- lion. The early buyers were mostly European investors interested in “socially responsible” or “sustainable” investments and, despite the bonds’ unmemorable name, they sold well.

A few months later, the World Bank issued its own green bond, this one denominated in Swedish kroner and similarly targeted at European investors. As with the Climate Awareness Bonds, investors quickly scooped up the World Bank bonds. Yet mainstream investors continued to regard green bonds as something of a curiosity. They figured these securities were best suited for do- gooders required to fulfill environmental mandates, not for traditional investors in the hard- nosed business of maximizing investment returns.

But something interesting happened in the decade after Romani’s bond sale. Heavyweights, including the Chinese government and Apple Corporation, issued their own green bonds. Industry groups agreed on common definitions and standards to govern the accept- able use of monies raised from green bonds. A cottage industry of third- party validators appeared to reassure investors that their green- bond investments were going only to authorized, green ac- tivities. In 2017, green- bond issuances exceeded $150 billion, and Wall Street started to take this formerly niche market seriously.

Despite the bonds’ considerable success, however, the issuers of green bonds have not typically used the proceeds to build resil- ience. Understandably, issuers have directed the vast majority of green- bond proceeds to pay for reducing greenhouse- gas emissions. Still, a few green bonds with resilience components have emerged.

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The city of Cape Town, South Africa, in its efforts to avoid running out of water, issued a bond to pay for technology to build resilience against water stress. The Brazilian pulp, paper, and packaging com- pany Klabin issued a green bond to pay for, among other things, efforts to reduce the company’s exposure to wildfires. Yet proceeds from the sale of green bonds could do a lot more to build resilience. Indeed, “resilience bonds” should eventually emerge as subcategory of green bonds. They should become a well- understood standard product that investors interested in supporting resilience will want to buy.

THE PARIS GRAND BARGAIN

In December of 2015, at a military airport outside Paris, most of the world’s nations approved the historic Paris Agreement, creating a truly global framework for tackling the climate challenge for the first time. At the heart of the agreement lay a grand bargain: developing countries agreed to join developed countries in reducing emissions, and developed countries agreed to raise money to help developing countries pay for emissions cutting and resilience. Although the de- veloped nations never explicitly recognized it, the financial arrange- ment was an attempt to grapple with one of the central injustices of climate change, namely, that the states least able to cope with cli- mate change are also the countries least responsible for causing the problem. This is especially true of small island states and most of the world’s low- income regions, whose contribution to the stock of greenhouse gasses in the atmosphere pales in comparison to that of the industrialized world and the largest emerging economies.

How much money did the parties to the Paris Agreement settle on? Developed countries promised to raise $100 billion per year by

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2020. That includes direct financial assistance from rich- country governments to be channeled through aid agencies, multilateral banks, and other institutions, as well as money raised from the pri- vate sector. That commitment continues until 2025. Thereafter, the number will increase to a to- be- determined level above $100 bil- lion. Developed nations hope they can pressure China— now the world’s largest greenhouse- gas emitter— to join them in contrib- uting money as part of an expanded financial commitment.

For poorer nations, this money is vital to pay for resilience. Richer economies are doing a decent job so far in delivering on the $100 billion, but that amount is not nearly enough to cover the growing needs. The money must be spread among dozens of coun- tries and must stretch to cover both greenhouse- gas- reduction and resilience efforts. So far, governments are spending only about a quarter of the money on resilience. Many poor nations find it diffi- cult to access the money in the first place because of slow domestic and international bureaucracies and cumbersome requirements. Yet despite these challenges, international climate finance is a resource worth tapping into, especially as rich countries, and perhaps the de- veloping countries that emit a lot of carbon, consider contributing more resources.

In addition to raising funds to pay for resilience before disaster strikes, governments also need to raise money to pay for recovery and rebuilding after the damage has been done. There are several tools decision- makers can use.

FORCING OURSELVES TO SAVE

In 1995, a double disaster hit Mexico. The country suffered a finan- cial crisis that pushed the economy into a deep recession. Then in

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October, Hurricanes Opal and Roxanne pummeled Mexico’s Gulf Coast and Yucatan Peninsula, killing hundreds of people and causing extensive damage. The government scrambled to make money avail- able for disaster response, but the economic crisis hampered these efforts. Resolving to do better, the finance ministry commissioned its head of budget policy, an economist named Fausto Hernández Trillo, to find new financial options for responding to disasters.

Trillo and his team designed the Natural Disaster Fund, better known by its Spanish acronym, FONDEN, to pay for postdisaster relief and reconstruction. Importantly, the Mexican Congress enacted legislation requiring the government to commit at least 0.4 percent of each year’s federal budget to FONDEN. In a typ- ical year, that has amounted to some $800 million. By embedding this mandatory contribution in the law, Mexico has created a stable source of funding that it can use to respond to disasters and invest in resilience projects. The law forces the government to save, no matter which political party is in power.

Other countries have followed in Mexico’s footsteps. Mozambique passed a law requiring at least 0.1 percent of its national budget be used to fund the country’s Disaster Risk Management Fund. Similarly, the Marshall Islands, the Philippines, Kenya, Jamaica, and Guatemala— nations that are all highly vulner- able to climate change impacts— have all set up national reserve funds. Of course, governments can also use reserve funds to pay for investments in resilience, not just for recovery.

These funds face risks, however. Politicians may find the tempta- tion to divert money from the disaster fund to pay for unrelated prior- ities or pet projects irresistible. To counter this temptation, the trick is to protect the money. Strong rules on use of the money, extensive information disclosure requirements, and clear lines of responsibility within government agencies can help ensure that the money goes only

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to resilience- related uses. This will make it harder for politicians to raid the rainy- day fund, and the money will be there when it’s needed.

The United States has a Disaster Relief Fund, which is the fed- eral government’s main source to pay for disaster relief and recovery. When the fund’s balance runs too low, Congress refills its coffers, but unlike funds in other places, this is not automatic. In a wel- come development, Congress passed legislation in 2018 requiring that six percent of the post- disaster assistance provided by the US Federal Emergency Management Agency (FEMA) should go into the agency’s Pre- Disaster Mitigation Fund. This should ensure that billions of additional dollars are used to build resilience before dis- aster strikes.

SHIFTING RISK TO THE PRIVATE MARKET

In January of 2017, the head of FEMA, Craig Fugate, closed a deal with an industry few people know about: reinsurance. Reinsurance companies insure other insurers. For a price, reinsurance compa- nies sell insurance coverage to primary insurance companies and other clients who seek protection against some of the world’s most extreme risks. Reinsurers can afford to deal in this type of risk be- cause they have large capital reserves and globally diversified insur- ance and investment portfolios. In theory, this means that they will always have money to cover claims because the chance of multiple large- scale catastrophes happening at the same time has historically been very low.

For years, Fugate had been concerned about the financial health of the federally run National Flood Insurance Program (NFIP). As we saw in chapter 3, the NFIP’s financially unsustainable arrangements have saddled the program with growing debts. Fugate

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worried that future disasters would put the NFIP deeper in the red. To deal with this challenge, FEMA purchased a $1 billion insurance policy from global reinsurance companies. If a single flood event cost FEMA more than $4 billion during the year, reinsurers would pay a quarter of the losses.

Events soon demonstrated the prudence of Fugate’s move. Eight months after the reinsurance purchase, Hurricane Harvey devas- tated the Gulf Coast, causing massive losses and triggering $8 billion in NFIP payouts to homeowners whose properties had been dam- aged or destroyed. FEMA’s reinsurance policy paid out the full $1 billion, and in 2018, the agency purchased even more reinsurance, this time $1.5 billion of coverage. Similarly, the United Kingdom’s Flood Re (see chapter 3) program that assists homeowners in man- aging flood risk, has bought billions of pounds worth of reinsurance.

Governments around the world have also turned to reinsurance markets to raise money quickly after natural disasters. In the devel- oping world, countries in Africa and the Caribbean have banded to- gether in regional pools that allow them to buy reinsurance more cheaply than they could on their own. During the Obama admin- istration, the United States helped extend similar pools to Pacific islands and nations in Central America. Through these risk pools, governments buy so- called parametric insurance policies, which pay out automatically and quickly when an event of a certain magnitude occurs. There is no need to wait for damage assessments, which can take weeks or months. In this way, parametric policies provide fast cash to respond to droughts, hurricanes, earthquakes, and floods. This matters, because experience shows that the quicker and more effective the initial response to a disaster, the lower the long- term economic damage. Reinsurance, including parametric products, will remain a key tool to enable governments and businesses to raise money for coping with climate impacts.

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BETTING ON CATASTROPHE

In addition to reinsurance, governments and businesses have turned to catastrophe, or “cat,” bonds to secure cash quickly after a disaster. A cat bond is another way for a company or government to purchase catastrophic risk insurance. Instead of buying the protection from a reinsurance company, the government or company buys it from scores of investors.

A cat bond works like this: Assume a business or government wants the ability to respond quickly in the event of a disaster or just wants more protection to cover catastrophe losses. So it issues a cat bond, which is essentially a contract with the investors who buy the bond. The company or government pays the investors interest every month and, in exchange, the investors agree that if a certain predefined natural disaster happens during a specific time period, the company or government automatically gets the money from the sale of the bonds. Investors walk away empty- handed, except for any interest payments they have received. Cat- bond investors are essen- tially placing a bet that catastrophe will not strike.

After Superstorm Sandy, for example, New York City’s Metropolitan Transit Authority (MTA) spent hundreds of millions of dollars repairing the subway system. To secure this money, the authority pulled resources away from other vital priorities. MTA officials wanted a better way to raise emergency funds, so they is- sued a $200 million cat bond in 2013. The authority agreed to pay investors 13.5 percent interest, but if at any point during the bond’s life, independently managed tidal gauges at different points around the city showed storm surge exceeding a certain height (at Battery Park, on the city’s southernmost tip, it was 8.5 feet, or 2.6 meters), the bond would automatically trigger payment of the bond pro- ceeds to the MTA.

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New York City was not alone in turning to cat bonds. To add to its reinsurance coverage, FEMA issued its first cat bond in 2018 for $275 million to protect the NFIP’s finances. Meanwhile, Mexico uses cat bonds to protect its national reserve fund, FONDEN, from large losses. Mexico, Colombia, Peru, and Chile jointly launched a $1 billion cat bond to cover earthquakes.

As of 2019, the cat bond market exceeded $30 billion, and it continues to grow as more governments and businesses seek finan- cial protection from climate- driven extreme events. It’s not hard to see why. The issuers of cat bonds like the product because it provides an alternative to reinsurance that is sometimes more cost- effective and transparent. Investors like the high interest rates that cat bonds typically pay. They also appreciate how a cat bond diversifies their portfolio, since the value of a cat bond has little to do with the eco- nomic factors and trends that affect other investments, for example economic growth, interest rates, and the price of oil.

As former Treasury Secretary Hank Paulson warned his Republican colleagues, climate bailouts will remain politically irre- sistible. As long as the US government continues this reactive ap- proach, the country’s fiscal health will continue to suffer, leading to serious economic consequences for future generations. In countries where climate bailouts are less feasible, the alternatives will be even worse. Climate- driven extremes will force developing nations to rely even more heavily on unstable sources of foreign aid or to simply go without adequate support. Communities and businesses must do better, and that means deploying both old- fashioned approaches and financial innovations to raise funding not only for disaster re- lief, but also for resilience.

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PRESCRIPTIONS AND PROVOCATIONS

• The federal government and states should direct meaningful portions of revenues from cap- and- trade systems and carbon taxes to investments in resilience; green banks should also adopt resilience as a core part of their mission.

• Green- bond standard- setting organizations should develop definitions and standards to govern the acceptable use of pro- ceeds from the sale of resilience bonds and actively publicize new offerings of resilience bonds.

• State and local governments and the private sector should pilot value- capture methodologies to finance resilient infrastructure.

• State governments should pursue forming risk pools to pur- chase parametric insurance products or issuing cat bonds to access cash quickly in the aftermath of disasters; the federal government should continue to protect the NFIP through the use of resinsurance and/ or cat bonds.