Water-Gulping Companies' Risk Disclosures Run Dry: Report
Author: Timothy Gardner
Tap water comes out of a faucet in New York, June 14, 2009.
Photo: Eric Thayer
WASHINGTON - Most publicly traded companies that depend on water do not adequately disclose their financial risks to droughts and future regulations, even as water scarcity problems mount, according to a report released on Thursday.
The report produced by Ceres, a coalition of investors and environmentalists and Swiss Bank UBS, ranked 100 of the biggest publicly traded companies on the quality, depth and clarity of their water disclosure risks and opportunities.
"This report makes clear that companies are not providing investors with the kind of information they need to understand the risks and opportunities posed by water scarcity," said Jack Ehnes, chief executive officer of the California State Teachers' Retirement System.
The group, known as CalSTRS, is a member of Ceres.
Many kinds of companies depend on large and readily available water supplies to run their businesses. Energy, beverage, food and semiconductor companies are among the ones that face risks from dwindling water supplies, especially in developing countries where populations are rising and industries are growing.
Risks include food shortages and higher prices for commodities because of drought, a problem already evident in places such as Australia and the U.S. Southwest.
Some power companies use water to cool their plants. Others generate electricity at dams. Both face some of the biggest risks if they lose their water, the report said. In 2007 and 2008, several power plants in the U.S. Southeast nearly shut down because of drought, the report said.
"It is clear that any threat to water security could have a significant impact on the bottom line of such companies," said Julie Hudson, global head of sustainability research at UBS Investment Bank.
Among power companies, Arizona Public Service, a unit of Pinnacle West Capital Corp, scored highest, in part because it uses treated sewage to cool power plants in Arizona, the report said.
Canada's biggest natural gas producer Encana Corp had the lowest ranking in the oil and natural gas industry with a score of four. Oil company BP scored 35, the best in that industry.
Dr Pepper Snapple Group had the lowest rank in the beverage industry, while Diageo, the world's biggest spirits group, scored highest.
In food, Bunge Ltd scored lowest, and Unilever scored highest.
Micron Technology Inc scored lowest in the semiconductor industry, while Toshiba Corp scored highest.
The companies with low scores were not immediately comment on the report.
More information is available at www.ceres.org/waterreport
(Editing by Robert MacMillan)