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Many governments around the world have been making progress mobilizing public and private capital to accelerate the energy transition, with significant money inflows into projects in recent years. These inflows are necessary to meet the tripling of funding needs for low-carbon projects across sectors by 2030 to meet 2050 net-zero goals.
Stablecoins provide a bridge between the highly volatile cryptocurrency ecosystem and the traditional financial world.
China’s reach is quietly growing behind minerals critical to a wide range of products that will shape the future. Facing more restrictive foreign investment policies in developed markets, Chinese firms are pursuing such key minerals as lithium and cobalt in other locations.
Daily Update: September 8, 2023
Unpacking the landscape for women in leadership — including 1 bright spot
How the global ESG recruiting landscape is changing
Daily Update: September 1, 2023
July 2023 — TCFD handing over climate disclosure monitoring; EU soil health proposal; sustainability reporting rules for mutual funds in India
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.
Paying for Water
In the rolling hills and forests of upstate New York, the weekend hiker occasionally finds an idyllic lake or stream surrounded by signs warning that the body of water before them is the property of faraway New York City. Keeping a city of more than 8 million residents provided with fresh, potable water requires a massive investment in a watershed that covers approximately 2,000 square miles. Leaks in the system of pipes and aqueducts that brings this water into the city can result in losses of 35 million gallons of water per day. Around the world, this kind of lost water, or nonrevenue water, deters investment in water infrastructure and creates a global sustainability challenge. S&P Global Ratings published an in-depth study called “Lost Water: Challenges and Opportunities” on Sept. 6 to analyze the influences that nonrevenue water has on access to safe water, water stress, freshwater withdrawals on ecosystems and global greenhouse gas emissions.
According to S&P Global Ratings, about 126 billion cubic meters of water is lost globally when it is withdrawn from groundwater or surface water sources and treated to local standards, for which utilities do not receive payment. This nonrevenue water is equal to the combined freshwater withdrawals of Germany, France, Spain, Italy and the UK. If the value of that water is calculated according to the average rates of US water utilities, the total lost revenue amounts to $187.2 billion annually. The environmental cost of processing nonrevenue water amounts to 11.85 billion kilograms of carbon dioxide. Nonrevenue water can be lost through pipe and interconnections leakage, stolen through illicit withdrawals or simply used without payment due to public policy decisions or aging meters that underestimate water usage.
Clean, potable water is an economic and practical necessity. According to the World Health Organization, more than 829,000 people die from diarrhea each year because of unsafe water and sanitation practices. While wealthier countries often enjoy better access to safe water, there does not appear to be a strong correlation between per-capita GDP and rates of lost water, meaning nonrevenue water is not only a problem for the developing world. However, the impacts of nonrevenue water are often felt most acutely in low-income populations. Access to clean water requires substantial infrastructure investment. When water is not associated with revenue, that infrastructure struggles to attract investment.
Nonrevenue water contributes to water scarcity since the water may be lost or misallocated. When this happens, stakeholder conflicts over access to water increase as households, agriculture, industry, hydropower generation, recreation and ecosystems compete for a scarce resource. Scarcity also contributes to lost water, when some stakeholders engage in illicit withdrawals to meet their needs. In response, utilities take more water from rivers, lakes and aquifers, which exacerbates shortages for downstream communities.
Even in cases where water scarcity is not an issue, infrastructure investment affects the amount of nonrevenue water. The percentage of nonrevenue water is a useful metric for utilities since it can be used as a proxy for attention and investment in infrastructure maintenance, meaning utilities with high water loss may struggle to attract investment.
“The lost water opportunity might become an opportunity lost, since governments and utilities are managing lean capital budgets, conflicting capital needs to address climate impacts and improved pollution management, and rising affordability pressure,” S&P Global Ratings’ analysts wrote. “Utilities could struggle to make even those investments with quick payback periods.”
Today is Friday, September 8, 2023, and here is today’s essential intelligence.
Written by Nathan Hunt.
Global PMI Shows Recovery Fading Further In August As Developed World Output Falls
Global economic growth slowed for a third straight month in August, according to the S&P Global PMI surveys, based on data provided by over 27,000 companies. A third month of falling worldwide factory output amid weakened global trade was accompanied by a further faltering of this year’s recent revival of service sector growth. The slowdown was driven by the first fall in developed world output since January, hinting at the intensifying drag on growth from higher interest rates and the cost-of-living crisis. Falling output in Europe led the deteriorating picture, but the US also came close to stalling, leaving Japan as the only major developed economy sustaining growth.
—Read the article from S&P Global Market Intelligence
Credit Trends: Global State Of Play: Debt Growth Diverging By Credit Quality
Higher-for-longer interest rates are increasingly impacting credit markets. Over the past 12 months, as most major central banks aggressively tightened monetary policy, the par value of investment-grade debt outstanding continued to grow, supported by rising bond issuance. With their stronger credit quality, investment-grade issuers appear less impacted by the initial interest-rate shocks, so far. By contrast, speculative-grade debt further contracted over the past year.
—Read the report from S&P Global Ratings
Listen: El Niño Spells Dire Straits For Shippers At The Panama Canal
Draft reduction at the Neopanamax locks and limitations on daily transits at the Panamax lock system have resulted in longer wait times to transit the Panama Canal. Shipowners have been raising freight costs to seek reimbursement for higher transit and demurrage fees; lightering ships by offloading cargo before crossing; or rerouting ships via alternative but longer routes. S&P Global Commodity Insights’ Barbara Troner, Americas freight senior managing editor, discusses these impacts with Americas tankers reporter Catherine Rogers, containers reporter Laura Robb and dry bulk reporter Nikolaos Aidinis Antonopoulos.
—Listen and subscribe to Commodities Focus, a podcast from S&P Global Commodity Insights
Sustainability Insights Research: Building Energy Regulations And The Potential Impact On European RMBS
S&P Global Ratings conducted a scenario analysis of properties in the UK (focusing on England and Wales), Ireland, France and the Netherlands, where energy performance certificates (EPCs) indicate low energy efficiency (for example classes F and G). It found that climate transition risks linked to changes in energy-efficiency performance regulations currently have a limited impact on European RMBS. This is due to uncertainties on the timing and extent of sale or rental restrictions, financing available for renovations, supply and demand in housing markets and structural protections in RMBS transactions.
—Read the report from S&P Global Ratings
Listen: Is The Bionaphtha Market Ready To Soar As European Biorefining Booms?
The European bionaphtha market is starting to gain traction as the number of available feedstocks increases and demand for cleaner alternatives grows. Limited supply capacity has kept prices high, but production is set to increase amid a boom in biorefinery construction in the region. As a result, more trading opportunities will become available, along with the potential for a liberalized and transparently priced market. In this episode of the Platts Oil Markets podcast, London-based oil price reporters Vinicius Maffei, Simone Burgin and Aly Blakeway join Francesco Di Salvo to discuss the development of bionaphtha, as well as SAF and biopropane markets, as Europe leads the way in alternative fuels.
—Listen and subscribe to Platts Oil Markets, a podcast from S&P Global Commodity Insights
AI For Security, Security For AI: 2 Aspects Of The Intersection Of 2 Hot Topics
AI has been a trending topic in technology for many years, but nothing has fueled interest like the explosive emergence of generative AI over the past year. As with many nascent trends, security often rises to the top of opportunities as well as concerns, and this is no less true with AI — it was a central focus of this year’s RSA Conference. It was also the theme of the opening keynote at Black Hat, where the AI Cyber Challenge, a Defense Advanced Research Projects Agency (DARPA) initiative launched by the Biden-Harris administration, was announced. That same week, DEF CON hosted the largest public “red teaming” (penetration testing) exercise against AI models to date.
—Read the article from S&P Global Market Intelligence