Investors Seek Stronger Disclosure by U.S. Water Providers

Apr 2, 2013 6:00 AM ET
Press Release

BOSTON, April 2, 2013 /3BL Media/ - Tighter water supplies. Aging infrastructure. Uncertain water demand. Climate change.

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 bonds that pay for pipelines, treatment plants and other key infrastructure - now want better information on how water utilities are managing these wide-ranging risks.

To assist in spurring this improved disclosure, Ceres is releasing a disclosure framework for water and sewer utilities. The framework—the result of extensive stakeholder outreach with both water providers and the investors who purchase their bonds—is designed to be used by water utilities preparing financial disclosure documents, and by investors and credit rating agencies assessing their financial health.

In a letter last week to the National Federation of Municipal Analysts (NFMA), a dozen investors managing $40 billion in assets have requested that water utilities be subject to stronger disclosure requirements on issues like water supply scenario planning, climate change impacts and pricing strategies.

"Without better disclosure, investors are blindly placing bets on which utilities are positioned to manage these growing risks," said Sharlene Leurig, a water financing expert at Ceres, who helped prepare the letter sent to the NFMA Disclosure Board. "The operating environment of water providers is changing, and investors need to be sure utilities whose debt they are holding are adapting. If utilities are not adapting, they may end up not having the money to repay their debts.”

The letter was signed by a dozen investors, including Breckinridge Capital Advisors, Boston Common Asset Management, Trillium Asset Management, Calvert Asset Management, Walden Asset Management, Pax World Management, Clean Yield Asset Management and Water Asset Management.

"Given the heightened attention to credit analysis across the municipal (bond) market, and the shifting operating environment facing (bond) issuers within the water and sewer sector, we believe an update to NFMA disclosure best practices is needed," wrote the group.

The letter follows a new Ceres report, Water Ripples, Expanding Risks for U.S. Water Providers, which outlines failing infrastructure, growing water availability pressures, declining revenues, falling per-capita water use and other risks that water utilities are facing across the United States. These combined pressures are behind the year-on-year trend of fewer upgrades to downgrades noted by Standard & Poor’s.[1]

Citing such pressures, the investor letter asks the NFMA for better disclosure on more than a dozen specific topics, among those:

  • Water supply scenario planning used to support revenue projections (based on water sales)
  • Approaches for assessing climate change impacts on water supplies
  • Current and planned investments in watershed protection 
  • Approaches for assessing water demand impacts from water pricing increases
  • Strategies and investment in water conservation
  • Strategies for assessing condition of their infrastructure and replacement needs  

While a number of water utilities already disclose these factors, sector-wide disclosure is highly uneven, a challenge to comparative credit assessment and risk-based pricing, One water utility, Cascade Water Alliance in Washington State, deployed the Ceres’ disclosure framework in its latest bond offering of December 2012.

For more information:

Peyton Fleming, 617-733-6660,

About Ceres

Ceres is an advocate for sustainability leadership. Ceres mobilizes a powerful coalition of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy. Ceres also directs the Investor Network on Climate Risk (INCR), a network of 100 institutional investors with collective assets totaling more than $11 trillion.

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[1] Standard & Poor’s. “US Municipal Water Sewer Utilities Face Continued Rate and Drought Pressures in 2013.” February 20, 2013.