Liquid Assets:

1
Liquid Assets Responsible Investment in Water
Services
Leslie H. Lowe Energy Environment
Program Interfaith Center on Corporate
Responsibility www.iccr.org

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The Interfaith Center of Corporate Responsibility
(ICCR)

• A leader of the corporate social responsibility
  movement for 38 years.
• 275 faith-based institutional investors with over
  100 billion in collective assets under
  management.
• A network of responsible investment firms, public
  pension funds, foundations, and labor unions.
• Each year ICCR members, associates and affiliates
  sponsor over 200 shareholder resolutions on major
  social and environmental issues.

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Principles for Responsible Investment (PRI)
We will seek appropriate disclosure on ESG
issues by the entities in which we invest.
Over 180 institutions, with collective assets
exceeding 10 trillion under management, have
signed on to the PRI.

4
A child in the developed world consumes 30-50
times more water than a child in the developing
world where 6,000 people die each day of
water-related disease, most of them children
under five. UNESCO Water Facts
Expanding access to water and sanitation is a
moral and ethical imperative rooted in the
cultural and religious traditions of societies
around the world and enshrined in international
human rights instruments. Millennium Project
Task Force on Water and Sanitation.
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Water services the most capital intensive of
all utilities

• 400 billion to 600 billion needed for global
  water infrastructure investments in the next two
  decades World Bank 111 billion to 180
  billion per year required to meet MDG for
  sanitation by 2015 UNESCO.
• 202.5 billion investment needed over the next
  20 years in U.S. wastewater facilities and an
  additional 122 billion is needed to ensure safe
  drinking water supplies. U.S. EPA

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Millennium Development Goals (MDG) Goal
7, Target 3 Halve, by 2015, the proportion of
the population without sustainable access to safe
drinking water and basic sanitation.
Photo ClaudiaD / iStockphoto
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Less than 3 of the Earths water is freshwater.
Of that, less than 0.5 is accessible to plants,
animals and humans. There is no more freshwater
today to sustain a population of 6 billion people
than there was in the year 1 BCE when the global
population was estimated to be 250 million people.
Photo NASA
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Freshwater Availability 1961-1990
These maps are reproduced by courtesy of Prof.
Martina Flörke of the Center for Environmental
Systems Research, University of Kassel, Germany.
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Freshwater Availability 2020s
These maps are reproduced by courtesy of Prof.
Martina Flörke of the Center for Environmental
Systems Research, University of Kassel, Germany.
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Freshwater Availability 2050s
These maps are reproduced by courtesy of Prof.
Martina Flörke of the Center for Environmental
Systems Research, University of Kassel, Germany.
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Freshwater Availability 2070s
These maps are reproduced by courtesy of Prof.
Martina Flörke of the Center for Environmental
Systems Research, University of Kassel, Germany.
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• Depleting Groundwater
• North America's largest aquifer, the Ogallala
  (extending from Texas to South Dakota), is being
  depleted at a rate of 12 billion cubic meters
  (bm3) a year. Total depletion to date amounts to
  a volume equal to the annual flow of 18 Colorado
  Rivers.
• Between 1991 and 1996, the water table beneath
  the north China plain fell by an average of 1.5
  meters a year.
• More than half of Europe's cities are exploiting
  groundwater at unsustainable rates. Chronic water
  shortages are already affecting 4.5 million
  people in Catalonia.
• -- Credit Suisse, Water Strategy.

Photo www.tourlewiscounty.com
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Irrigation accounts for 70 of global water
withdrawals and 90 of global water consumption.
Photo http//cropwatch.unl.edu.
14
The proportion of the population in urban areas
worldwide is expected to rise from 48 (3 billion
people) in 2003 to over 61 (5 billion people) by
2030 with most of the growth in the cities of
Africa and Asia.
Photo Abenaa / iStockphoto
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Sanitation Service in Major Urban Areas

• Urban households that have sewerage connections
• 18 of urban households in Africa
• 35 of urban households in Latin America
• 45 of urban households in Asia
• 92 of urban households in Europe
• 96 of urban households in North America

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Desire for development is infinite, but water
resources are finite, so sooner or later the lack
of sufficient water will set limits on growth.
Ma Jun, Chinas Water Crisis.
Photo http//envis.maharashtra.gov.in/envis_data/

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How will people who cant afford food pay for
water? An African Diplomat.  
Photo Sean Warren / iStockphoto
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Treating water as an economic good

• Full cost recovery for water services raises
  ethical concerns when poor people are priced out
  of the market for this necessity of life.
• When pricing eco-system services, who speaks
  for the frogs, the fish and the organisms that
  may play a vital but as yet undiscovered role in
  the ecological order?
• Water and sewerage services are natural
  monopolies where the discipline of market
  competition is absent and regulation is needed to
  ensure high quality and fair pricing.
  Privatization merely replaces a government
  monopoly with a private one.

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Corruption at the core of the governance crisis
in the water sector.
 

• According to the World Bank
• 20 to 40 of water sector finances are being
  lost to dishonest and corrupt practices
• 50 of water-related firms in emerging economies
  pay bribes for public procurement practices and,
• Among companies from OECD countries, the figure
  is 45 percent.

How can governments that are too corrupt or
incompetent to operate a public utility be
trusted to handle the procurement process for a
lucrative monopoly or to effectively regulate
private service providers?
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Why Water is Special.

• It is
• Essential
• Non-substitutable
• Scarce, finite
• Fugitive
• Indivisible, part of a system
• Location bound
• Bulky and difficult to mobilize
• Prone to market failure
• A public good that has aesthetic , spiritual and
  cultural value

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We Are All Stewards of the Water Commons
 
Drinking water and wastewater utilities, public
and private, are entrusted with management of
essential services affecting human health,
community development and the water commons.
They should, therefore, be required to
demonstrate to all stakeholders their competence
in carrying out these important
responsibilities. Unfortunately, disclosure of
consistent, comprehensive and comparable
performance data on environmental, social and
governance issues is the exception not the rule
in the water services sector. Liquid Assets
Responsible Investment in Water Services
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Bar Graph 1 Environmental, Social and
Governance Content This figure shows the score of
each of the 12 water utilities surveyed for this
report for the environmental, social and
governance content of their Internet-based
disclosures.
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Bar Graph 2 Climate Change This figure shows
the scores for the 12 water utilities surveyed
for disclosure regarding climate change and its
potential impacts on water resources, physical
assets and future operations in water stressed
areas.
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Bar Graph 3 -- Water Scarcity  This figure shows
the scores for the 12 utilities surveyed for
disclosure of areas of operation where water
resources are scarce or stressed or likely to be
so in the near or long term.
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Bar Graph 4 Governance  This figure shows the
scores for the 12 water utilities surveyed for
disclosure of their good governance and
anti-corruption policies.
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Bar Graph 5 Water Quality  This figure shows
the scores for the 12 water utilities surveyed
for disclosure of water quality compliance
reports for drinking water and/or wastewater,
including their record of fines and violations.
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Bar Graph 6 Sewage Treatment  This figure
shows the scores for the 12 water utilities
surveyed for disclosure regarding their sewage
treatment operations and volume of wastewater
returns.
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ICCR Calls For An International Data Commons for
Water
In the absence of mandated disclosure
requirements, it falls to the responsible
investment 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.
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Creating a Data Commons for Water

• A publicly accessible, web-based Data Commons for
  Water modeled on the World Banks International
  Benchmarking Network for Water Sanitation
  (www.ib-net.org) will
•  
• Empower civil society stakeholders with
  information to hold local water utilities
  accountable for provision of affordable,
  equitable, high quality service and sound
  stewardship of water resources.
• Develop robust datasets based on standardized
  performance metrics and reporting protocols for
  evaluating and benchmarking management of
  non-financial risks that may undermine financial
  performance.
• Foster competition among firms based on
  sustainable environmental practices, stewardship
  of water resource, customer satisfaction, and
  good community relations by spotlighting leaders
  and laggards in these areas.

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Creating a Data Commons for Water

• Improve valuation of equity and debt securities
  of both public and private water utilities by
  providing comprehensive data on whether improved
  ESG performance by water utilities leads to
  better financial performance, when and under what
  circumstances.
• Provide ESG performance data to help responsible
  investors identify opportunities for investment
  in water services that will support local and
  regional water capacity and advance the
  Millennium Development Goals (MDG) for drinking
  water and sanitation.