WASHINGTON — A new report by a New York-based foundation representing faith-based institutional investors is faulting some investor-owned water utilities for failing to provide key non-financial disclosures, though the report gives high marks to two publicly owned utilities.
In a 71-page report released Wednesday, the Interfaith Center on Corporate Responsibility urges water utilities to provide better environmental, social, and governance disclosures to investors. It also calls for the creation of an international, Web-based “data commons” for such disclosures, based on a “benchmarking network” already established by the World Bank but that is currently only used in the developing world.
The report, which surveys 12 utilities worldwide, notes that the additional disclosures would be especially important in steering capital to well-run projects in the coming years. In the U.S. alone, $202.5 billion must be invested over the next 20 years in the nation’s wastewater facilities and an additional $122 billion must be invested to ensure safe drinking water supplies, the report said, citing estimates by the Environmental Protection Agency.
Though the report’s findings laud two publicly owned utilities, the authors stress that they are not taking sides in an ongoing debate on whether it is better to privatize water utilities than operate them through publicly owned entities.
“The question for responsible investors is not one of ownership but of performance: how to identify water utilities that are financially sound and have demonstrated success in building natural, social and moral capital, whether they be government- or investor-owned,” the report said.
Still, the two publicly owned utilities received the highest ratings, led by the Department of Water and Energy in New South Wales, Australia, which supervises 111 government-owned and operated water and wastewater utilities, including four serving the area in and around Sydney. New South Wales won 55 out of 63 possible points for its disclosures.
The New York City Department of Environmental Protection, the other publicly owned utility, received a 50, the second-highest score. ICCR said that although the DEP does not issue a comprehensive report, most of the information the authors sought is “readily found” on its Web site or in stand-alone reports that can be accessed through the site.
The report faults the DEP for a lack of details on energy use and information tied to massive losses of water from one of its reservoirs. A spokesman declined to comment, in part because he had not had a chance to see the report. The New York City Municipal Water Finance Authority issues debt for the DEP.
The report also praised investor-owned utilities in the Philippines as well as in the United Kingdom. But it criticized utilities run by Veolia Environment, the world’s largest water and wastewater treatment company, for disclosures that were global in focus and not based on the watershed where their individual utilities operate.
Turning to tax-exempt bonds sold in the U.S., the report notes the rating agencies’ practice of rating muni bonds on a separate, more stringent scale than corporate debt. As a result, some issuers have been forced to credit enhance their debt to ensure they are traded as investment-grade bonds.
But the report notes that at least one issuer, Charleston Water in Charleston, S.C., was able to raise its rating by providing enhanced data to Fitch Ratings on improvements to its environmental performance.