The Ripple Effect: Water Risks In The Municipal Bond Market

Water scarcity risks in municipal bonds and other resource risks are often ignored when it comes to long-term investments.


Investing in municipal bonds for major infrastructure projects bears hidden risks, says a newly issued report “The Ripple Effect: Water Risk in the Municipal Bond Market” by CERES.

Many local and state governments are running the risk of defaulting on bonds because of massive financial problems. Worse, many electric and water utilities are experiencing surging water demand, pollution and more frequent drought. Despite these challenges, some municipal bonds still enjoy stable ratings agencies like Fitch, Moody’s and Standard & Poor’s and fail to point out apparent risk factors.

The report informs investors, utilities, rating agencies and underwriters to identify those challenges and urges for new strategies that incentivize water conservation. The paper was written in coalition with institutional investors and sustainability organizations, partnered with stakeholders including Water Asset Management and Deutsche Bank’s Climate Change Investment Research Group.

Ceres is a coalition of investors, environmental groups and other public interest organizations working with companies to address global sustainability challenges.