Flood-Risk Climate Adaptation Gaps in US Cities : Large-Sample Evidence from Textual Analysis of Cities’ Financial Disclosures

Adaptation by cities is critical in reducing the inevitable impact of climate change. Here we present the first large-sample evidence of cities' adaptation to elevated flood risk, a key consequence of climate change. We construct and analyze a new linguistic measure of adaptation extracted from financial disclosures for 431 US cities over 2013-2020. While cities with a higher flood risk have higher adaptation, many high-risk cities are still under-prepared: more than half of high-risk cities have below-average adaptation levels. We explore three factors associated with this adaptation gap, defined as a city's level of adaptation being lower than predicted based on flood risk. Contrary to concerns about the political divide in climate change responses, we do not find that Republican cities are more likely to have an adaptation gap. Instead, our evidence points to the importance of cities' financial constraints: cities with one standard deviation smaller unrestricted-fund-to-expense ratio are 5.9% more likely to have an adaptation gap. We also find support for a novel factor, myopic planning horizon, where cities with a one-year-shorter horizon are 4% more likely to have an adaptation gap. Such myopia may explain why cross-sectional tests show that state grants do not fully mitigate financial constraints