As a desert metropolis, the City of Phoenix – the fifth largest city in the U.S. – understands better than most the true value of water.
But the Colorado River, one of Phoenix’s main sources of freshwater, is under threat. Drought exacerbated by climate change could cause central Arizona to lose its entire Colorado River supply in the next five years, drastically impacting quality of life as well as the local economy. Without this water source, Arizona’s GDP could drop by over US$185 billion and put more than two million jobs at risk.
To protect its precious freshwater resources, the City of Phoenix has tapped into wellsprings of innovation and collaboration with other stakeholders. Phoenix has sought to decouple growth from water, aiming to use the same amount of water they used twenty years ago today and to ensure water security. Here are five ways in which the City of Phoenix is leading on water security.
1) Setting long-term goals and tracking progress
Phoenix has an ambitious but attainable long-term goal: to secure a clean and reliable 100-year supply of water by 2050. It is pursuing this goal in part by building reserves of groundwater for future use. Phoenix is a net-positive contributor to groundwater, using only 2/3 of its allocation from the Colorado River and diverting the other 1/3 toward groundwater recharge.
Compared to most global cities, Phoenix is ahead of the game in setting a water security-related goal. CDP data shows that at least 59% of cities face substantial current or future risk to their water supply, but only 31% have a water management plan to safeguard this vital resource.
2) Finding opportunities in wastewater management
Cities across the U.S. use treated wastewater in many ways, including in habitat restoration. Phoenix aims to recycle every ounce of wastewater that travels through its system, recycling 89% of its wastewater for irrigation.
The city also uses millions of gallons of wastewater to cool the Palo Verde Nuclear Plant, the largest nuclear generating station in the country. This plant produces more than 30% of the electric power that is generated in Arizona, and it is in part Phoenix’s treated wastewater that cools the plant to keep nearby towns and cities humming – including those in neighboring California.
3) Embracing nature-based solutions
Wetlands, forest cover and other nature-based solutions provide low-carbon ways for cities to manage water risk. Nature-based solutions have enormous potential to boost water security across the world – Phoenix is part of a rising tide of those who understand that healthy cities and companies depend on healthy river basins.
Phoenix’s Tres Rios Wetlands project, for example, restores a 700 acre natural wetlands area (home to more than 150 different species of birds and animals) to its 1800s condition. The City directs treated wastewater to the Wetlands, where it undergoes a final polishing, creating a vibrant ecosystem benefiting the entire metropolitan area.
4) Affordable, accessible water for all
Equity is a growing focus of the City’s water security efforts. Water pricing schemes keep water in Phoenix one of the most affordable among the 25 largest cities in the country, but prices are intentionally kept high enough to discourage planting water-intensive grass lawns in wealthy neighborhoods.
The city has also been replacing old water pipes in low income communities and works with a citizen’s committee to ensure all neighborhoods in Phoenix have access to safe, clean, affordable drinking water. Since 2017, the City has also collaborated with the Gila River Indian Community to address drought in Lake Mead, an important water body shared by residents of both the reservation and the city.
5) Financing the City’s water security efforts
Like cities across the U.S., the City of Phoenix knows that ambitious environmental projects require financing. In March 2020, the City announced an issuance of bonds for municipal water infrastructure to fund its drought resiliency efforts. A large portion of these bonds were Sustainability Bonds, meaning that the funds raised are used to explicitly support sustainable development projects with beneficial social and environmental goals. The Sustainability Bond market is growing rapidly, expected to surpass US$500 billion in value by the end of 2020, and has potential to drive long-term environmental resilience in the nation’s cities.
Phoenix, which is a member of CDP’s Sustainable Finance Training Cohort, chose in their official investment protocols – the Official Statement of Issuance – to explicitly refer investors to their City CDP disclosure on an ongoing basis for annual reporting on how the City is utilizing the funds borrowed. CDP’s questionnaire provides an in-depth look at progress against the city’s climate mitigation and adaptation and resilience plans and projects.
As the Official Statement reads, “The City plans to report the use of proceeds for this bond issuance through its annual CDP disclosure, which provides information about the City’s environmental impacts.”
Investors use public disclosure as an invaluable tool for managing risk and informing investment decisions. More and more municipal bond investors are beginning to ask for information on climate risks, and they are increasingly utilizing CDP disclosure to better evaluate the risks of their investments and understand the impacts and ambition of various issuers.
Zach Solomon of Morgan Stanley said: “The City of Phoenix has taken the long view on how to adequately sustain clean and reliable sources of drinking water in a city that is not only in a desert environment, but also is growing very quickly. Given that context, we were excited to work with the City on a Sustainability Bond that we knew would resonate well with investors. Ultimately, investors want to elicit impacts in the areas of the greatest need in each community and water sustainability projects in Phoenix exemplify that type of opportunity.”
This additional disclosure by the City of Phoenix reinforces the value of clear, standardized project data to both underwriting banks and investors and will no doubt serve to support the City’s bond and future climate efforts. Phoenix is demonstrating leadership by prioritizing a water-secure future in the long-term for all residents of the desert city.
Cities must protect water for citizens, as well as the businesses that keep their local economies running. To take action on water, the first step is to disclose thoroughly on water. Yet only 22% of global cities that disclosed to CDP in 2019 completed all water-related questions in the cities questionnaire. Much deeper level disclosure by cities on water management is needed – from identifying potential water shortfalls to reporting on projects funded with proceeds borrowed from investors, disclosure around water management and risk is critical to ensuring a water-secure future.
By following Phoenix’s example, cities can grow this ripple effect of positive change into sustainability action that makes waves – exactly what’s needed to meet the global water crisis.