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Enhancing Water Disclosure and Credit Assessment

U.S. water providers are facing unprecedented challenges, including more vulnerable water supplies, declining revenue and growing environmental pressures. Investors who finance the projects that keep the water flowing - by purchasing municipal bonds that pay for pipelines, treatment plants and other key infrastructure projects - now want better information on how water utilities are managing these wide-ranging risks.

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U.S. water providers are facing unprecedented challenges, including more vulnerable water supplies, declining revenue and growing environmental pressures. Investors who finance the projects that keep the water flowing - by purchasing municipal bonds that pay for pipelines, treatment plants and other key infrastructure projects - now want better information on how water utilities are managing these wide-ranging risks.

Ceres has been highlighting the financial risks associated with these challenges, beginning with the report, The Ripple Effect: Water Risk in the Municipal Bond Market. The report is designed to help bond-rating agencies, utilities and investors understand the long-term financial risks of trying to manage water shortages through overreliance on new large-scale water supply projects.

Since then, Ceres has been working closely with bond investors and credit rating agencies to enhance water utility disclosure on these topics and evolve credit risk assessment methods that support more sustainable water resource management.

In January 2016, Standard & Poor’s released an update of its credit rating methodology for the public water sector. The updated methodology is favorable to utilities that incorporate climate risk assessment into their planning and are proactive in drought management and reducing water leakage rates. According to S&P, the new methodology is expected to result in a credit movement of 25% of its rated water and wastewater utilities.

“Municipal bonds—the debt instrument of choice for public utilities—are bought and sold on the basis of their credit ratings. Yet today these ratings take little account of utilities’ vulnerability to increased water competition, nor do they account for climate change, which in many areas is rendering utility assets obsolete.”
­- Ceres, The Ripple Effect

 

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Meet the Expert

Brooke Barton
Director, Water Program

Brooke BartonBrooke leads Ceres’ water program, directing the organization’s research and corporate and investor engagement on the risks and opportunities related to growing water scarcity. She is the co-author of The Ceres Aqua Gauge: A Framework for 21st Century Water Risk Management. Brooke works with Ceres company members in the food and beverage sector, advising them on sustainability strategy and reporting, and coordinating dialogues between companies and their investor, NGO and labor union stakeholders.

Learn more about Brooke

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