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April 02, 2013
Investors Want Better Disclosure from Municipal Water Utilities
by Robert Kropp
Basing their requests on a framework developed by Ceres, 12 investors write to the National
Federation of Municipal Analysts, asking for improved disclosure to ensure that all material
information is provided.
Twelve institutional investors representing $40 billion in assets under management have sent a detailed letter to the
National Federation of Municipal Analysts (NFMA), requesting that the regulators consider mandating
improved disclosure relating to the financial filings for municipal water and sewer transactions.
Basing their requests on a disclosure framework for water and sewer utilities released by Ceres, the investors have specified supply security, demand
management, asset management, water quality, energy use and generation, and rates as critical areas
in need of improved disclosure.
Municipal utilities often raise funds for infrastructure
upgrades through bond offerings, and the investors want to ensure that the financial filings
accompanying the offerings fully address risks as the effects of climate change. The investor
letter points out that the member utilities of the Water Utility Climate Alliance (WUCA) "are employing
scientific and asset management tools to assess the effects of climate change on their systems and
adapt system operations and capital planning accordingly."
A coalition of ten of the
nation's largest water providers, WUCA seeks to assess the findings of climate science to "improve
water management decision-making in the face of climate uncertainty."
"Issuers in the
water and sewer sector have a range of staffing resources to prepare and submit disclosure
documents," the investor letter concludes. "For this reason, we encourage NFMA to carefully
consider where disclosure is most appropriately made with particular attention to the Comprehensive
Annual Financial Report (CAFR), audited financial statements and Official Statements."
Sharlene Leurig of Ceres said, "Without better disclosure, investors are blindly placing bets
on which utilities are positioned to manage these growing risks. The operating environment of water
providers is changing, and investors need to be sure utilities whose debt they are holding are
Cascade Water Alliance, a water utility located in the state of Washington,
deployed the disclosure framework developed by Ceres for its bond offering in December, 2012.
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