Global environmental damage caused by human activity in 2008 represented a monetary value of $ 6.6 trillion, equivalent to 11% of global GDP, calculates a study released October 5, 2010 by the UN-backed Principles for Responsible Investment (PRI) and the UN Environment Programme Finance Initiative (UNEP FI). Those global costs are 20% larger than the $ 5.4 trillion decline in the value of pension funds in developed countries caused by the global financial crisis in 2007/8.

The study, an initial effort to quantify in monetary terms the environmental harm caused by business and the possible future consequences for investor portfolios, fund returns and company earnings, estimates that in 2008 the world's top 3,000 public companies were responsible for a third of all global environmental damage. The study warns that as environmental damage and resource depletion increases, and governments start applying a "polluter pays" principle, the value of large portfolios will be affected through higher insurance premiums on companies, taxes, inflated input prices and the price tags for clean-ups.

The most environmentally damaging business sectors are: utilities; oil and gas producers; and industrial metals and mining. Those three accounted for almost a trillion dollars worth of environmental harm in 2008. The top 3,000 companies by market capitalisation, which represent a large proportion of global equity markets, were responsible for $ 2.15 trillion worth of environmental damage in 2008.

Workers and retirees could see lower pension payments from funds invested in companies exposed to environmental costs, says the study, which was commissioned by the PRI and UNEP FI and conducted by Trucost, the London-based environmental consultancy.

The study, projects that the monetary value of annual environmental damage from water and air pollution, general waste and depleted resources could reach $28.6 trillion in 2050, or 23% lower if clean and resource-efficient technologies are introduced.

The study recommends investors should exercise their ownership rights, collaborate to encourage companies and policy-makers to reduce these environmental externalities, and request regular monitoring and reporting from investment managers on how they are addressing exposure to environmental risk.

Read the report at http://www.unepfi.org/fileadmin/documents/universal_ownership.pdf.

The Principles for Responsible Investment, convened by UNEP FI and the UN Global Compact, was established to help investors achieve better long-term investment returns and sustainable markets through improved analysis of environmental, social and governance issues. The Initiative has over 800 signatories from 45 countries with more than $ 22 trillion of assets under management. www.unpri.org

UNEP FI is a strategic public-private partnership between UNEP and the global financial sector. UNEP works with nearly 200 banks, insurers and investment firms to understand the impacts of environmental, social and governance issues on financial performance and sustainable development, and to embed best sustainability practice in financial institution strategies and operations. www.unepfi.org

United Nations Environment Program Finance Initiative (UNEPFI) www.UNEPFI.org
Press Release, October 5, 2010

On October 26, 2010 Hermes Real Estate Investment Management Limited announced the publication of its fourth annual Responsible Property Investment (RPI) Annual Report: ‘Protecting and enhancing value: the role of sustainability’, which explains Hermes’ RPI risk management strategy and programmes, with an emphasis on current focus areas which will most affect performance over time.

Attention to sustainability and environmental concerns runs to the heart of Hermes’ long-term investment strategy. In order to protect value, Hermes place emphasis on understanding the cost benefits associated with sustainability improvements, assessing the RPI risks and quantifying the sustainability benefits of new assets, as well as developing mitigation strategies in line with its wider property management programme.

This year’s report sits in the context of the upcoming launch of the CRC Energy Efficiency Scheme. To minimise the financial risks that accompany carbon-priced real estate, all must be ready to manage their carbon capped portfolio via responsible asset management, emission projections and understanding allowance markets.

The report details the ... savings that Hermes’ ... internal performance monitoring and market benchmarking have enabled over the course of 2010 including:
* Over £600,000 savings in energy and direct landfill tax avoidance
* Lowest insurance premium in the market thanks to their track record on risk and safety
* Reduced carbon emissions by 3.5% across their property portfolio on a like for like basis
* Sent only 2% of waste directly to landfill
* Achieved an absolute water reduction of 3% across their property portfolio

The full report is accessible on-line: www.hermes.co.uk/rpi_report_10

Hermes Real Estate Investment Management Limited www.hermes.co.uk
via wwww.CorporateRegister.com

Abstract: The paper explores the bi-directional relationship between ISO 14001 certification and financial performance with the aim of shedding light on whether better performance is due to the beneficial effects of ISO 14001 or due to selection-effects where better performance precedes accreditation. The study uses a five year longitudinal analysis to compare the financial performance of firms in Spain before and after certification. The results of a multivariate panel data analysis find that firms with better than average performance have a greater propensity to pursue accreditation but there is no evidence that improvements in performance follow certification. This suggests that the inference that environmental variables cause improved financial performance may be unwise in research studies that can only measure association.

by Iñaki Heras-Saizarbitoria 1, José F. Molina-Azorín 2 and Gavin P.M. Dick 3
1. University of the Basque Country, E.U.E. Empresariales, P.Oñati 1, E-20018 San Sebastian, Spain
2. University of Alicante, Department of Management, Campus de San Vicente, Ap. 99, E-03080 Alicante, Spain
3. Kent Business School, University of Kent Canterbury, Kent, United Kingdom
Journal of Cleaner Production via Elsevier Science Direct www.ScienceDirect.com
Volume 19, Issue 1; January, 2011; Pages 1-12

Abstract: This paper draws on a conjoint choice experiment conducted in parallel with a hedonic property value study to test specific hypotheses about the convergence of distance-based and stated-preference-based measures of economic impact. Distance to the geographic feature of interest is commonly used in hedonic property value studies as a proxy for the degree of influence of an amenity or disamenity. However, there exists little evidence to support distance as a good proxy. This study of a contaminated site indicates convergence between hedonic estimates of proximity discounts and stated preference (SP) estimates of overall benefits of cleanup. However, the methods do not converge on the extent of influence and the economic value of relocation. The SP estimates for the value of relocation differ significantly from the SP estimates for the value of full cleanup and are substantially smaller than, although not significantly different from, the hedonic values for distance.
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The 1987 Amendments to the Great Lakes Water Quality Agreement between the U.S. and Canada designated 43 sites in the Laurentian Great Lakes, and their tributaries, as Areas of Concern (AOC). A common feature of these areas is the presence of toxic chemicals – notably polychlorinated biphenyls (PCBs) – known to cause cancer and neurological/developmental defects in humans and to bioaccumulate in aquatic foodwebs. The AOCs are essentially aquatic Superfund sites.
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[In the hedonic valuation] for a property located at the approximate mean distance from the AOC of 2.5 miles, the per-household estimated discount is $4,692 – approximately 7% of the sample mean property value of $84,619. For properties located closer to the AOC initially, say at 0.5 miles, the estimated per-household price discount is more substantial: $15,588 or 23% of the sample mean property value. Additional computations for net benefits at different assumed initial conditions are reported.... A mean sale price of $84,619 is used. This is the mean of the conjoint response sample, to which they later compare hedonic estimates. The mean sale price of homes to the south of the AOC in the hedonic sample is $66,000.
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Calculation of the price discount requires only information on the proximity of a property to the AOC and market values. Summing the individual property price discounts, the estimated total capital loss south and within five miles of the AOC is $118 million. This represents approximately 5.5% ($5,142 per home, on average) of the assessed value of the properties within five miles south of the AOC.
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[For the stated preference estimates] the per-household estimates of WTP in the south are smaller than those based on the entire sample. the aggregate net benefits for full cleanup range from $249 million to $338 million, less than half of the total net benefits. Estimates based on the sample to the south of the AOC are the basis for comparison to the hedonic estimates, since significant hedonic price impacts are evident only to the south.
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The per-household estimates of WTP in the south are smaller than those based on the entire sample. the aggregate net benefits for full cleanup range from $249 million to $338 million, less than half of the total net benefits. Estimates based on the sample to the south of the AOC are the basis for comparison to the hedonic estimates, since significant hedonic price impacts are evident only to the south.

The differences evident in this test could be due to upward bias in the stated value of cleanup. Respondents might have bundled non-use values together with use values even though the context was the purchase of a private home. To test this hypothesis, the authors compute the estimated WTP for cleanup for a home located at the assumed impact boundary, 5 miles from the AOC. For a household with mean demographics and house attributes, the WTP for cleanup, is $11,098 and significantly different from zero at the 1% level. This result indicates either that individuals included nonuse values in their responses or that 5 miles is not considered a “safe” distance from the AOC. The latter explanation seems implausible given the nature of the contamination.

by John Braden 1, Laura Taylor 2 and DooHwan Won 3
1. University of Illinois
2. North Carolina State University
3. Sungshin Women's University
World Congress of Environmental and Resource Economists wwww.WCERE2010.org
Session: Environmental Valuation: Hedonic Analyses I

The Long Island Power Authority (LIPA) partnered with Castella Imports to upgrade [its facility at 60 Davids Drive] Hauppauge facility with an energy efficient industrial refrigeration system resulting in significant energy savings.
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The energy efficient industrial refrigeration system is estimated to save Castella Imports approximately $58,000 annually or 338,274 kWh in energy savings.

The cost of the retrofit design was $383,206 and was completed by Industrial Refrigeration in Ronkonkoma. LIPA’s Commercial Efficiency program provided a substantial incentive of $75,103 to help offset the cost.
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The energy efficiency measures taken by Castella Imports under LIPA’s Commercial Efficiency program will reduce LIPA’s demand by 39.64 kW per year and will have the equivalent effect of eliminating over 428,000 pounds of Carbon Dioxide from the air or 22,053 gallons of gasoline not consumed for a year.

LIPA’s Commercial Efficiency program is part of LIPA’s Efficiency Long Island (ELI) initiative. Efficiency Long Island is a 10-year, $924 million energy efficiency program launched in 2009, which offers a wide array of incentives, rebates and initiatives to LIPA’s residential and commercial customers to assist them in reducing their energy usage and thereby lowering their bills.

For more information on LIPA’s Commercial Efficiency program visit http://www.lipower.org/commercial/efficiency/commercial.html .

Long Island Power Authority www.lipower.org
Press Release dated October 8, 2010

Newsweeks's 2010 Green Rankings is a data-driven assessment of the largest companies in the U.S. and in the world. Their goal was to cut through the green chatter and quantify the actual environmental footprints, policies, and reputations of these big businesses. To do this, they teamed up with three leading environmental research organizations to create the most comprehensive rankings available. Who made the top 10? View our methodology.
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To produce the 2010 Green Rankings, NEWSWEEK collaborated with MSCI ESG Research—a leading source of environmental, social, and governance ratings—which served as lead research organization; Trucost, which specializes in quantitative measurements of environmental performance; CorporateRegister.com, the world’s largest online directory of social responsibility, sustainability, and environmental reports; and their editorial partner, ASAP Media. The goal was to assess each company’s actual environmental footprint and management of that footprint (including policies and strategies), along with its reputation among environmental experts.
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The U.S. 500 list includes the largest publicly traded U.S. companies, and the Global 100 list (new this year) includes the largest publicly traded companies.... Company size was evaluated according to revenue (most recent fiscal year), market capitalization, and number of employees, all as of March 31, 2010.
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Companies on each list—the U.S. 500 and the Global 100—are ranked by their overall Green Score. This score is derived from three component scores: the Environmental Impact Score (EIS), the Green Policies Score (GPS), and the Reputation Survey Score (RSS), weighted at 45 percent, 45 percent, and 10 percent, respectively. The Green Score, as well as each component score, is published on a scale from 100 (highest performing) to one (lowest performing).

Environmental Impact Score:
Based on data compiled by Trucost, it is a comprehensive, quantitative, and standardized measurement of the total environmental impacts of a corporation’s global operations (90 percent) and disclosure of those impacts (10 percent). More than 700 metrics—including emissions of nine key greenhouse gases, water use, solid-waste disposal, and emissions that contribute to acid rain and smog—figure into the Environmental Impact Score.

Trucost uses publicly disclosed environmental data to evaluate company performance for each impact metric whenever possible, and uses a proprietary economic input-output model to calculate direct-company and supply-chain impacts in cases where data is unavailable. To fairly assess the impacts of companies operating in more than one industry, Trucost uses a benchmarking system. First, Trucost calculates the total environmental impacts per total economic output (usually in dollars of revenue) for 464 industry sectors. Then, it evaluates the proportion of a company’s revenue that is derived from each sector in which it does business. This research is fed into the model, which uses the benchmarks for each of those sectors (for example, total water use of the oil industry per its total economic output) to estimate the company’s impacts (in this case, its water use). Trucost draws on any relevant data that’s available, such as the EPA Toxics Release Inventory, to further refine the model....

Once the specific impacts of a company have been quantitatively assessed, Trucost calculates an environmental damage cost for each—a dollar value representing the potential cost to society of resulting damage to the environment—based on a standardized cost per quantity of each environmental input or output that Trucost has developed from valuation studies and other academic literature. The costs for each individual metric are added up to produce a dollar estimate of the company’s total environmental impact. Finally, this figure is normalized by company fiscal-year revenue (this allows companies of all sizes to be compared) and factored in as 90 percent of the company’s raw EIS.

Trucost’s disclosure score credits companies for releasing usable data that cover its global operations for each of the individual environmental-impact metrics that Trucost tracks, weighted according to the relative importance of each impact to the company’s overall footprint. For example, if Trucost determines that a given company’s footprint is comprised of 50 percent greenhouse gas emissions, 25 percent dust and particle emissions, and 25 percent water use, but that only the first two factors were disclosed comprehensively, then the company would get a disclosure score of 75 percent. This score factors in as 10 percent of the company’s raw EIS.

Green Policies Score:
Derived from data and analysis provided by MSCI ESG Research, the Green Policies Score is an assessment of how a company manages its environmental footprint. The MSCI ESG Research scoring model measures the quality of each company’s environmental reporting, policies, programs, and initiatives. More than 70 individual indicators are incorporated into the Green Policies Score, categorized into the following five issues: climate-change policies and performance; pollution policies and performance; product impact; environmental stewardship; and management of environmental issues. These address, respectively, how well each company manages its carbon emissions; how well each company manages its noncarbon emissions to air, water, and land; the life-cycle impacts of each company’s products and services; how well each company manages and uses its local resources; and the quality of each company’s track record of managing environmental risks. Data on regulatory compliance, lawsuits, controversies, and community impacts are also among the indicators taken into account within each category.

MSCI ESG Research draws its data from a variety of sources, including company-disclosed information; dialogues with companies; media coverage; and government, NGO, and third-party research. The initial data is used to rate companies on a scale of zero to 100 for specific indicators, and then those factors, weighted according to their importance, are rolled up into scores for each of the five key environmental issues, and then into the overall raw GPS.
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Before the rankings were calculated, MSCI ESG Research and Trucost each sent letters in mid-May to all companies being ranked, inviting them to review each research organization’s existing analysis and to provide additional information where appropriate....

Reputation Survey Score:
This score is based on an opinion survey of corporate social-responsibility professionals, academics, and other environmental experts who subscribe to CorporateRegister.com. The survey went out to 14,921 validated users and asked each respondent to rate a random sample of 15 companies on a sliding scale (100 to one) from “leader” to “laggard” in three key green areas: environmental performance, commitment, and communications. Of those surveyed, 2,480 individuals were identified as “sector specialists”—those having a specific working knowledge of environmental issues within their industry—and were asked only to score companies in their sector of expertise. Additionally, the CEOs from all companies on the Newswee U.S. 500 and Global 100 lists were invited to participate in the survey....

... Any responses with suspicious scoring patterns were disregarded. The survey’s response rate was 12 percent, twice that of the 2009 Reputation Survey....

Chief-executive scores were given a weight of three, sector specialists a weight of two, and other participants a weight of one. Each company’s performance, commitment, and communications scores were then averaged to produce its raw Reputation Survey Score.

Ranking the Companies:
To calculate a company’s overall ranking, the three component scores were standardized, combined using a weighted average, and mapped to a 100-point scale for publication.

The raw component scores were first converted to standardized values called Z scores, which reflect how individual companies performed in relation to the average for each of the three scores....

Finally, a weighted average of the Environmental Impact (45 percent), Green Policies (45 percent), and Reputation Survey (10 percent) Z scores was taken to generate the overall Green Z score....
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Selected company rankings follow:

No 10. Nike
Nike stands out for its particularly strong commitment to handling environmental issues in its supply chain. The company has a number of programs in place for evaluating and improving the environmental footprint of its suppliers, including checks on chemical toxicity, water use, and carbon emissions. Nike is also progressing toward carbon neutrality itself and aims to achieve it for company-owned facilities and business travel by 2015. The company has worked to improve its own environmental performance through increased efficiency and use of renewable energy. For instance, it has reduced energy use substantially at some of its facilities by installing energy efficient lighting and HVAC systems, and its headquarters in Belgium and the Netherlands currently run on 100 percent renewable energy (the Belgium facility actually produces more energy than it uses). Nike is also investing in new teleconferencing equipment to cut down on business travel. Nike had a Reputation Survey score of 97.39 (based on a survey of academics, sustainability experts, and CEOs).
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No 5. Intel - Overall Score 97.57
Intel's efforts to reduce waste and to mitigate its use and release of toxics are notable. It has high recycling rates for both hazardous and non-hazardous waste and is working to find suitable alternatives for toxic components in its products. Intel also has a strong commitment to energy efficiency. The company ties a portion of its employees' compensation to reaching environmental goals, and its Intel Core and Atom chips are among its greenest products. The corporation has been the Environmental Protection Agency's largest green power purchaser among Fortune 500 companies for the past three years, with almost half its U.S. energy coming from renewable sources. Newsweek's Rankings gave them an environmental impact score of 95.74.

No 4. Johnson & Johnson - Overall Score 95.02
Johnson & Johnson stands out among its competitors for its climate-change policies, with clear goals and deadlines for reducing its greenhouse gas emissions. This includes the reduction of baseline 1990 CO2 emission levels by 7 percent by 2010—, goal the company surpassed with a 16 percent absolute reduction. Between 2005 and 2009, the company also reduced nonhazardous waste by 32 percent and hazardous waste by 32 percent, exceeding its goal of 10 percent. Similar goals in paper, packaging, and energy efficiency have been met or improved on through steps like the company's largest installation of solar panels at a New Jersey site. As a result, a comprehensive assessment of their environmental initiatives earned them a Green Policies score of 98.86 in the rankings.

No 3. IBM. - Overall Score 95.20
This global technology manufacturer has a strong program for reducing its own greenhouse gas emissions and also offers products and consulting services to help clients make their businesses greener. IBM set out in the 1990s to reduce its own consumption of electricity and water, and between 1990 and 2000 cut its energy use by 5.1 billion kilowatt hours, enough to power a medium-size town. The company's newest venture, its Sustainability Management System technology, aims to help clients operate their commercial buildings more efficiently. The product was a home-grown solution, allowing an IBM semiconductor factory in Burlington, Vt., to cut water usage (a key ingredient in chip-making) by 30 percent. The company has also participated in a pilot program to reduce Stockholm's traffic congestion, which resulted in a 14 percent drop in emissions from road traffic in the inner city. IBM is working with London, Singapore, and Brisbane to address their traffic-management and congestion challenges. For its overall excellent scores, IBM ranked No. 3 on the U.S. list and No. 1 on the Global ranking.

No 2. Hewlett Packard - Overall Score 99.32
HP has long been an industry leader in environmental issues. The company dates its commitment to the philosophy of its founders, Bill Hewlett and Dave Packard, who believed technology can improve society. One of its most notable programs aims to reduce greenhouse-gas emissions and use renewable energy. In 2008, HP began reporting greenhouse gases associated with its supply chain, making it the first major tech company to do so. It is also working to reduce the energy use of its products. If all the printers, PCs, and servers shipped in 2005 (all models, all brands, globally) were recycled and replaced with new HP energy-efficient models, the company estimates customers could save more than $10.4 billion in energy costs and avoid the release of more than 40 million metric tons of CO2 in the first year. That's equivalent to shutting down 10 coal plants for an entire year. In addition to a strong Environmental Impact Score (90.60), the company did very well in the Reputation Score, making it a close second to Dell.

No 1. Dell - 100.0
Dell has built its sustainability strategy over the years by setting a series of ambitious goals, several of which it has already met. In 2008, the company announced it would reduce its total emissions by 40 percent by 2015. It is well on the way to achieving that goal. Many of Dell's efforts are also focused on reducing the environmental impact of its products at all stages of their life cycles, from design to disposal. The company's laptops and desktops are now built to use 25 percent less energy than comparable systems made in 2005. That effort, among others, has saved its customers more than $5 billion in energy costs over the past few years. The company has also used 7.2 million pounds of post-consumer recycled plastic to build new computers--the equivalent of recycling 263 million water bottles. Dell also has one of the tech industry's most comprehensive recycling programs. The company takes back and recycles any of its products for free, and will also take back competitors' products at no cost with the purchase of new Dell computers or peripherals. Consumers can also mail back old equipment, Dell will pick up items at their homes, or they can drop them off at more than 2,000 Goodwill or 1,500 Staples locations.

Newsweek www.Newsweek.com
October, 2010

Growing water scarcity in many parts of the United States is a hidden financial risk for investors who buy the water and electric utility bonds that finance much of the country's vast water and power infrastructure, according to a first-ever report on the issue released October 21, 2010 by Ceres and Water Asset Management.

The report, The Ripple Effect: Water Risk in the Municipal Bond Market, evaluates and ranks water scarcity risks for public water and power utilities in some of the country's most water-stressed regions, including Los Angeles, Phoenix, Dallas and Atlanta. The report shows that some of the nation's largest public utilities may face moderate to severe water supply shortfalls in the coming years, yet these risks are not reflected in the pricing or disclosure of bonds that public utilities rely on to finance their infrastructure projects. There are about 50,000 public water utilities in this country serving an estimated 258 million Americans. The electric power sector is enormously water-intensive – it accounts for 41 percent of the nation’s freshwater withdrawals.

The report includes a model, to assess both water and electric utility water risk exposure. It compares, using publicly available information, their available supplies with projected water demand up to 2030, using stress scenarios that incorporate climate change impacts, regional water conflicts, water-saving regulatory actions and other potential external risks on water supplies.

Eight existing municipal bonds for water and electric power utilities were examined, in water-stressed regions in southern California, Arizona, Alabama, Georgia and Texas. Each of the bonds received water scarcity scores, representing their exposure to potential water related risks. Los Angeles and Atlanta water utility system bonds received the highest risk scores.
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The report concludes that current credit rating agencies' methodologies could do more to address water scarcity risks and provides recommendations for utilities, investors, underwriters and credit rating agencies to manage emerging water risks in utility bonds.

The report indicates that in order for utility bond ratings to convey a public utility’s true credit risk, it must incorporate the system’s vulnerability to water scarcity risks. “Today’s credit rating agencies fail to incorporate these metrics consistently, leaving investors with insufficient information for managing their potential exposure in holding such bonds," the report states.

The report includes specific recommendations for utilities, investors, underwriters and credit rating agencies to manage emerging water risks in utility bonds:

Download a full copy of the report free of charge at http://www.ceres.org/Document.Doc?id=625

The models have been based on analysis of the key water supply and demand factors impacting the utilities based only on publicly available information including public disclosures, and may not reflect the real risk to each utility if the public information is not accurate.

The water risk scores do not give an indication of how likely the bond issuer is to default on the bond repayments. It is a score related to risk of water undersupply only. To assess the risk of default, this water risk score needs to be analysed in conjunction with the financial health of the utility.

About the report recommendations
The report includes specific recommendations for utilities, investors, underwriters and credit rating agencies to manage emerging water risks in utility bonds:

Water utilities:
• Improve disclosure of material water stresses such as exposure to persistent drought or long-term climatic changes, interstate legal conflicts, and potential and existing regulatory actions related to environmental flows. Disclosure should include potential capital costs, rate adjustments and revenue effects from water supply risks.
• Implement new pricing strategies and conservation incentives that reflect water scarcity and reward water-savings.
• Invest in cost-effective infrastructure that reduces leakage and encourages water recharge and reuse.

Electric utilities:
• Improve disclosure of material water stresses caused by increased competition for water, emerging regulations and changing climatic conditions. Such disclosure should include water intensity of generation, key water sources and the potential capital costs, rate adjustments and revenue impacts from water risks.
• Invest in measures to reduce risk, such as strategies for reducing energy use and therefore water demand.

Rating agencies:
• Employ water risk stress tests to understand an issuer's sensitivity to water scarcity risks.
• Factor water intensity into rating opinions for electric utilities.
• Reward, via higher ratings, utilities that manage water demand through pricing in anticipation of future supply constraints.

Key facts in the report include the following:
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More regular droughts and heat waves are likely to increase the operating costs of power generators in the Southeast, among them the Tennessee Valley Authority, which was forced to slash power generation for two weeks at three of its facilities in Alabama and Tennessee because of heightened water temperatures, costing the utility an estimated $10 million in lost power production.
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In 2009, public utilities made up about 10 percent of the nearly $3 trillion municipal bond market in daily trading volume.
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The American Society of Civil Engineers (ASCE) has given the average drinking water and wastewater system a D-, citing a $100 billion shortfall for routine maintenance for the next five years alone. A 2007 EPA estimate found that drinking water utilities face a total financing gap of $334.8 billion over a 20-year period. Electric utilities fare little better. According to ASCE, America’s electric power providers face a $45 billion five-year shortfall simply to finance basic infrastructure maintenance needed to improve the average system from its current D+ grade.8 Billions more will be required for utilities to adapt to the changing and growing stresses on water supplies.
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Today, most public utility disclosures and credit ratings apply the faulty assumption that future water availability will resemble the past. Investors helping utilities to finance capital improvements may be exposed to water risks obscured by credit ratings and utility disclosures that devote inadequate attention to these issues. An example of this is a 2009 opinion by Moody’s Investor Services affirming the Atlanta water system’s stable credit rating for $3.24 billion in debt, predicated in part on the sufficiency of Atlanta’s water supplies in the coming years. Yet, due to protracted water supply constraints in the southeast United States, a judicial order may reduce by as much as 40 percent Atlanta’s water withdrawals as early as 2012.
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More than 18 billion gallons per day of water are lost to leakage, poor accounting and other unbilled consumption. These losses are estimated at an annual cost of $2.6 billion.
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According to the EPA, each year there are 240,000 water main breaks, with this number expected to rise as U.S. water systems age. Over a 19-year period, large utility breaks in the Midwest increased nearly ten-fold, from 250 per year to 2,200 per year. On average, the replacement cost value of water mains is about $6,300 per household in 2007 dollars for large utilities with the greatest economy of scale.

The Southern Nevada Water Authority is proposing to build a nearly 300-mile pipeline to deliver 11 billion gallons of water each year from rural northeastern Nevada. The $3.5 billion project is intended to supplement dwindling Lake Mead supplies. The water authority has already invested $700 million to build a “third straw” to draw shrinking water supplies from the drought-stricken lake.
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During the 2007-2008 drought in Georgia, a subsidiary of electric power firm Southern Company was forced to buy $33 million in fossil fuels to replace lost power in Atlanta when hydropower generation declined by half due to low water levels, even though hydropower accounts for only two percent of the utility’s generation portfolio.
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Las Vegas is building a lower intake structure to withdraw drinking water from Lake Mead at a cost of $700 million.
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For thermoelectric power, reduced water flows may undermine a utility’s ability to get the volume of water needed to cool its facilities to meet electric power demand or to maintain base load generation. Lowering a thermoelectric intake structure can cost upwards of $200 million for a single coal or nuclear power plant, and installing a less water-intensive cooling system can cost more than $1 billion.
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A 2009 biological opinion by the U.S. Fish and Wildlife Service on the condition of the endangered delta smelt population cut delivery by California’s largest water provider, the State Water Project, by 800,000 acre-feet. Near term economic effects from reductions in Bay Delta deliveries average more than $500 million annually, and can exceed $3 billion in a prolonged dry period.
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Miami-Dade County projects a capital burden of $1.9 billion over the next 20 years to manage saltwater intrusion into its water supply.
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A family of four using 100 gallons per person each day will pay on average $32.93 a month in Las Vegas compared to $72.95 for the same amount in Atlanta, which has more than ten times the amount of average annual rainfall as Las Vegas. This trend holds fairly well across regions: typical rates in the coastal West are slightly over one percent of Median Household Income (MHI) and in the Southwest around 1.25 percent of MHI, compared to the national average of 1.5 percent of MHI.
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CERES www.ceres.org
Via/hat tip The New York Times Green Blog https://www.nytimes.com/2010/10/21/business/21water.html