Ceres, PricewaterhouseCoopers and Water Asset Management Join Forces to Assess the Impact of Water Scarcity on Municipal Bond Investments
Study will assess the risks to municipal water and electric power utility bonds
Amid growing concerns about water scarcity and climate change, Ceres announced a new collaboration today with PricewaterhouseCoopers LLP UK (PwC) and Water Asset Management LLC to drive sustainable investment in water-intensive sectors and the development of a resilient water infrastructure.
Announced today at the Clinton Global Initiative in New York, the collaboration will conduct the first study of the impacts of water scarcity and climate change on municipal bonds, which are typically considered safe investments highly sought by institutional investors including life insurers and pension funds. The bonds of both municipal-owned water and electric utilities will be included in the study because of the growing conflict between water and electric utilities drawing from the same water supplies in water-stressed regions of the country, such as the west and the southeast.
The collaboration aims to empower water managers, corporate leaders, credit rating agencies, and investors to support sustainable water-related investments.
Water is crucial for the global economy – driving every industry from agriculture to electric power to silicon chip manufacturing. Beverage, oil and gas, and tourism also rely on supplies of clean, potable water to survive and grow.
“The world’s economy runs on water. Yet climate change and overuse are conspiring to place at risk this most critical economic resource. Working with PwC and Water Asset Management to develop a framework for modeling water risk in the fixed income market demonstrates our strong commitment to enabling action by investors and companies committed to sustainable prosperity," said Mindy Lubber, Executive Director of Ceres.
The new report will build on , the February 2009 Ceres report which concluded that climate change will exacerbate growing water risks in the world’s most populous and economically productive countries, with impacts already being felt in the electric power, food and beverage and high tech sectors. Already, the western U.S. is seeing growth limited by reduced water supplies from melting snowcaps that sustain key rivers. Meanwhile, agricultural and power plant production has been cut back due to more frequent and intense heat waves and droughts in California and the southeast U.S.
“The United States has hundreds of billions of dollars invested in water infrastructure, not to mention investments in water-intensive sectors. Many of these systems are designed assuming that the hydrology of the U.S. can be based on our experience of the past. We know that is incorrect, as alongside the stresses on water resources from growing populations, industrialization and land-use change, climate change will affect the availability and quality of the country’s water, with negative implications in some regions and positive in others. Investors and businesses currently lack a framework to identify, plan for and adapt to water-related risks,” said Dr. Celine Herweijer, Director at PricewaterhouseCoopers LLP UK.
The collaboration comes in the midst of national energy legislation intended to tackle growing carbon emissions and pursue increased energy independence. Water shortages will be a critical determinant of the nation’s energy security, as transport and treatment of water controls a growing proportion of the U.S.’s kilowatt hours and electric power production accounts for nearly half of the nation’s water withdrawals, primarily for plant cooling. This water/energy collision is already playing out in the country’s most populous regions, whether in California, where one quarter of energy use goes toward moving and cleaning water, or in Alabama, where the drought of summer 2007 forced the partial closure of one nuclear plant. Climate change is expected to exacerbate existing supply-demand imbalances driven by population growth, especially for water and electric utilities drawing from the same water sources.
“Decreasing water supply in the face of growing demand poses a substantial risk for industrial, agricultural, and municipal enterprises. Despite the enormity of this challenge, most water-related problems can be solved using proven practices and existing technologies,” said Matt Diserio, President of Water Asset Management. “The first step is to identify and quantify undisclosed water supply risks. The second step is to implement full cost pricing which will attract the investment capital needed to repair and expand water infrastructure and facilitate conservation.”
The collaboration draws together institutions with complementary expertise in the areas of climate change, water infrastructure, and investment: PricewaterhouseCoopers, the global accounting and advisory services firm and global advisor to the Carbon Disclosure Project; Water Asset Management, an equity investor in the global water and water infrastructure sector; and Ceres, the nation's largest coalition of investors and environmental groups working with companies on environmental and social issues.
Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, a network of 80 institutional investors with collective assets totaling more than $8 trillion.
The collaboration with Ceres will be led by the Sustainability & Climate Change practice of PricewaterhouseCoopers LLP UK, part of the global PricewaterhouseCoopers Sustainability and Climate Change network, including over 800 dedicated staff. PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
About Water Asset Management
Water Asset Management is a global equity investor in public and private water related companies and assets. Those include regulated water and wastewater utilities, water infrastructure companies, water test and measurement equipment, water treatment technologies, and water resources including water rights, storage and effluent credits. Water Asset Management combines investment management with industry operating and capital commitment experience.