ICCR Ranks Utilities on Public Disclosure Issues
The Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors, say most investor-owned water utilities have a long way to go to provide adequate environmental, social, and governance (ESG) disclosure to investors.
The report, "Liquid Assets: Responsible Investment in Water Services," scores 12 public and private utilities on 21 key disclosure issues, with a possible score ranging from a maximum of 63 to -63. The two public utilities in the sample -- Department of Water and Energy, New South Wales, Australia (score 55) and City of New York Department of Environmental Protection, U.S. (score 50) -- did best. The two lowest disclosure scores went to investor-owned utilities in the United States -- Indiana American Water, a subsidiary of American Water, the largest investor-owned water company in the U.S. (score -45) and Veolia Water North America, a division of Veolia Environment, with 14 million customers in 600 U.S. communities (score -53).
The ESG score included such factors as planning for water scarcity and climate disruptions; governance and anti-corruption policies; equitable access; environmental fines; and quality of service. The report also highlights data gaps in current reporting by water utilities and calls for creation of a "data commons" for drinking water and sanitation utilities, whether investor-owned or government-owned.
Replacement of aging water infrastructures in developed countries as well as the demand for new infrastructure in emerging markets and developing countries points to enormous profit potential for investors. China alone plans to build 375 wastewater treatment facilities and, according to World Bank estimates, $400 billion to $600 billion in global water infrastructure investments will be needed in the coming years.
Laura Berry, executive director, ICCR, said: "Few water utilities, public or private, report on comprehensive quantitative and qualitative ESG indicators that would allow meaningful performance benchmarking, despite the fact that the protocols and Internet-based tools to facilitate this kind of reporting do exist. In the absence of mandated disclosure requirements, it falls to the [responsible investing] community to use its considerable financial power to raise reporting standards in the water services sector so that capital can be rationally allocated to those enterprises -- whether public or private -- most capable of meeting the extraordinary water challenges."
The U.S. Environmental Protection Agency estimates that $202.5 billion must be invested over the next 20 years in the nation's wastewater facilities and an additional $122 billion will be needed to ensure safe drinking water supplies. Globally, $180 billion in water infrastructure investment is needed each year for the next twenty years to meet freshwater demand, according to the World Bank.
In developing countries, the challenge of creating the infrastructure to serve the 1.1 billion people who lack access to an "improved source" for drinking water and the 2.6 billion people without basic sanitation -- and to do so by 2015, as called for in the United Nations Millennium Development Goals (MDG) -- is daunting. Meeting these goals will require the provision of drinking water services to an additional 300,000 people a day, and improved sanitation services to more than 380,000 people a day, most of them living in sub-Saharan Africa and Asia. As of late 2008, it appeared that countries were on track to meet the drinking water goal by 2015. The sanitation goal, however, is unlikely to be met, especially in the poorest countries in Africa.