A New Financial Tool to Protect Utilities and Communities from Wildfire Risk

SHIELD Bonds: Building Financial Resilience

The threat of wildfires is no longer a seasonal concern — it’s a year-round financial and operational challenge for utilities. With climate change increasing fire intensity and frequency, utilities in wildfire-prone regions must act decisively to mitigate risks before catastrophe strikes. However, traditional funding models fall short in providing the sustained investment needed for long-term infrastructure resilience.

The solution? A new class of municipal revenue bond, Strategic Hazard Investment for Energy & Local Defense (SHIELD), designed to provide utilities with dedicated capital for wildfire mitigation. By leveraging SHIELD bonds, municipal utilities, electric cooperatives and community aggregators can proactively fund equipment upgrades, vegetation management, and risk assessment tools — reducing financial exposure and costs while ensuring continued service reliability.

Wildfire Risk and the Financial Implications for Utilities

Wildfires aren’t just an environmental issue; they present a direct financial risk to utilities. Credit rating agencies such as Moody’s and S&P Global have already downgraded over 100 utilities due to wildfire liabilities, increasing borrowing costs and limiting access to capital. The municipality’s direct costs to fight wildfire are estimated at 20 times the mitigation costs. For a utility, the costs of post-wildfire litigation and infrastructure rebuilding often far exceed the costs of proactive mitigation.

A single major wildfire can erase years of infrastructure investment, disrupt service, and weaken public trust. The damage to the economic vitality of the community, after a catastrophic wildfire, continues for a decade. Proactively investing in wildfire prevention reduces these risks while demonstrating financial prudence to investors, regulators, and local communities.

How SHIELD Bonds Work

The SHIELD bond model is structured as a revenue-backed municipal bond, specifically tailored for utilities facing wildfire risks. These bonds provide upfront funding for wildfire mitigation while ensuring structured repayment through a modest, dedicated utility surcharge. The core elements of a SHIELD bond include:

• Revenue-Backed Model — SHIELD bonds are repaid through a small wildfire mitigation surcharge on utility bills, spreading costs equitably over time.
• 12-Year Term — Long enough to fund both immediate infrastructure upgrades and a sustained, cyclical vegetation management program of continuous improvement.
• Multi-Year Investment Approach — Funds critical projects such as line reclosers, sectionalizers, insulated conductors, fire-resistant poles, and advanced sensor networks.
• Risk Spend Efficiency (RSE) Framework — Ensures that funds are allocated to the highest-impact wildfire mitigation strategies. Regular reporting of independent, measurable risk reduction on Value at Risk, using fire paths and probabilities increases investor confidence in the community. There are multiple consulting firms that provide these types of reports, under a variety of names.
• Operating Budget for mitigation. During the 12 years, utility bill surcharge not only pays down the bond, using a sinking fund provision, but creates a continuous improvement cycle. The bond repayment structure maintains operating funds for the independent analysis of Risk to Financial Impact/RSE and vegetation management departments.

Why Municipal Leaders Should Act Now

City managers, county supervisors, and municipal treasurers have a unique opportunity to leverage SHIELD Bonds to secure their communities’ future. As wildfire risks escalate, failing to act could result in higher costs, reduced investor interest for all local bonds, higher interest rates, and greater financial vulnerability. Proactively adopting a SHIELD Bond approach positions municipalities as forward-thinking leaders who protect both their residents and their financial future.

By reporting an independent assessment of Risk Spend Efficiency (RSE), municipalities can demonstrate effective, data-driven wildfire mitigation strategies, fostering transparency and trust in the bond market. This proactive approach not only strengthens wildfire resilience but also secures more favorable financing terms across all municipal projects.

Utilities leveraging SHIELD Bonds can demonstrate a clear, data-driven approach to wildfire risk reduction, utilities can strengthen their position with regulators, investors, and customers, ensuring long-term financial and operational stability.

Benefits for Utility Engineering Departments

Utility engineering departments can significantly benefit from SHIELD Bonds in several ways. First, the bond funds infrastructure hardening projects, such as undergrounding power lines, upgrading substations, and other new tools for wildfire risk reduction, including geospatial intelligence. These proactive measures reduce the risk of utility-caused wildfires and improve system reliability.

SHIELD Bonds support the integration of advanced wildfire detection and suppression technologies, such as remote sensing, monitoring systems, and automated grid shutoff mechanisms. With these innovations in place, engineering teams can better anticipate fire threats, enhancing overall operational efficiency.

These advantages position engineering teams at the forefront of modern, resilient grid management, ultimately leading to a safer and more sustainable energy infrastructure.

The Role of Vegetation Management in Wildfire Resilience

Effective vegetation management is a critical component of wildfire risk reduction, and securing SHIELD Bond funding can greatly enhance these efforts. Vegetation is sensitive to changes in rainfall and weather volatility: It provides the fuel for large fires and plays a large role in wildfire risk.

Heavy rains followed by a hot, dry spell provides the ideal situation for large, catastrophic wildfires. After removal or burning, vegetation returns again in 3 to 4 years. It is this growth that creates the requirement for teams to actively remove shrubs and prune trees.

A quarterly risk reassessment, coupled with dedicated funding for multi-year fuel reduction cycles, fosters a culture of continuous improvement. SHIELD Bonds support systematic vegetation management programs that identify the most effective locations for firebreaks and prioritize high-risk areas. A well-executed vegetation management strategy mitigates wildfire spread, safeguarding both human life and critical infrastructure.

Innovations like Athena’s geospatial analytics, confirm what people on the ground know about risk, but highlights the most efficient resource allocation and targeted interventions, ensuring that the highest-risk areas receive attention first. By integrating technology-driven solutions with traditional vegetation management strategies, municipalities and utilities can significantly reduce wildfire risks while optimizing operational costs and efficiency.

A Call to Action for Civic Leaders

The SHIELD bond represents a transformational shift in wildfire risk financing. By proactively securing dedicated funds for prevention, communities can protect utility infrastructure, maintain financial stability, and enhance community safety — preventing tomorrow’s wildfire disasters before they strike.

Fighting wildfire is incredibly expensive, often costing 20 times more than prevention efforts. SHIELD bonds provide an economically sound way to spread wildfire mitigation costs over time, rather than relying on emergency funding after a disaster. By investing in infrastructure hardening, advanced monitoring technology, and vegetation management now, local governments can prevent costly future disasters while maintaining financial stability.

Electric, natural gas and water utilities can be held financially responsible if inadequate wildfire prevention contributes to destructive fires. But even more important is the economic impact of a fire on their community. Most areas with a catastrophic wildfire find it takes more than a decade to rebuild to the original economic vitality that the city or county enjoyed before the fire. This loss is beyond the human tragedy and public health impact.

Conclusion

Utility executives, policymakers, and municipal leaders must recognize that inaction is the costliest option. Using municipal SHIELD bonds isn’t just about fire prevention — it’s about protecting communities, strengthening local economies, and making smart financial decisions for long-term resilience.

The time to act is now. Contact your public finance bankers to discuss wildfire resilience funding through Municipal Revenue Bonds. They can help community supported utilities can safeguard their financial future, protect the communities they serve, and build a sustainable, fire-resistant energy grid for the decades ahead.

If you live in a rural area, and find this article potentially helpful to your community, I encourage you to forward it to your county and city leaders, as well as your local electric, gas and water utilities.