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For Corporations, Family Offices and Growth Ventures, in particular in financial services
Mandalore Partners is a (Corporate) Venture Capital-as-a-Service
That de-risk innovation programs with strategic, financial and impact investments
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Flooding in New York City caused by Hurricane Sandy Photo by Patrick McFall https://www.flickr.com/photos/ruanon/
Toledo, Ohio’s summer battle with toxic algae is just the latest in a string of weather-related catastrophes to beset our nation’s water and sewer systems. Hurricane Sandy’s unprecedented storm surge caused more than $500 million in damage to coastal water systems. Last year’s Arizona wildfires that killed 19 firefighters also devastated forested watersheds in a region already defined by water stress. And, of course, Hurricane Katrina swamped New Orleans’ water system, causing one of the few weather-related credit downgrades in the sector’s history.
Across the country, extreme weather is exposing the vulnerability of 20th century water infrastructure. This liability was brought into stark relief by a lawsuit brought by Farmers Insurance Co. against municipal sewage systems in the Chicago region for failing to invest in upgrades that could have prevented a monster rainstorm from spewing raw sewage into basements and streets in April of last year. The lawsuit, which was later dropped, put water systems on notice that these extremes are the new normal their systems must be redesigned to manage.
Insurance companies are not alone in recognizing the costs of water infrastructure failure under extreme conditions. Recently, both Standard & Poor’s and Moody’s Investors Service—two of the largest credit rating agencies in the market—published their concerns about our infrastructure’s exposure to extreme events and climate change. Moody’s has gone so far as to propose comprehensive changes to its bond rating methodologies to account for “exposure to weather volatility” and other extremes, including over-dependence on water sales, which may be vulnerable to drought.
How these rating agencies factor in weather risks will have a major impact on the bottom-line of water systems that depend on the markets to finance their infrastructure. The riskier a water system looks, the higher the interest rate it will likely pay when it offers its bonds on the market.
Recognizing that both the markets and water service providers are planning against an ever more uncertain future, the U.S. Environmental Protection Agency recently released a synopsis of discussions it convened between the decision makers in the markets and water systems who have been leaders in defining what climate adaptation looks like for the water industry.
Whether climate extremes are causing sewage geysers or algal blooms, the end result will be more spending driving our water rates even higher.
But what if instead, we use climate extremes as a reason to fundamentally reevaluate the services our water utilities provide and how they provide it? What if we look at this as a design challenge to create more value for water utilities and their customers instead of less?
That’s what some U.S. utilities are already doing, and it’s driving a burst of innovation that should inspire us to believe
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