Rendición de cuentas y transparencia judicial

These results suggest that drought-related financial risks can be effectively pooled for water utilities to reduce the cost of protecting themselves from drought-related losses via an index-based financial contract. Despite some degree of spatial autocorrelation in the hydrologic indices considered, and thus in the insurance payouts, risk pooling can significantly lower the reserves required to reliably make aggregate payouts, especially relative to risk shifting. With significantly lower reserve requirements should come significantly lower contract prices, and combining this with a relatively simple and transparent index, should increase the appeal of these financial contracts.

Given that water utilities are faced with a changing landscape that is more dependent on temporary actions (such as conservation) to manage more extreme droughts, and recent work has recognized the critical role of financial tools in mitigating financial risks from these drought events, this work helps to add an additional improved solution to mitigating financial losses.

Ultimately, through the use of these financial instruments, water utilities could help to not only improve their financial risk management but also improve water resource management. If utilities are less concerned over the financial losses associated with lower volumetric sales, then they may be more likely to make greater use of conservation in their planning, reducing the need to develop expensive new supplies. This will benefit utilities in terms of greater financial

stability and improved credit ratings, as well as utility customers who should experience lower prices over the long-term.

ACKNOWLEDGMENTS

Data and insights from Jeffrey Hughes and Shadi Eskaf of the Environmental Finance Center at the University of North Carolina at Chapel Hill were integral in completing this research. Financial support for this research came from the National Science Foundation Graduate Research Fellowship Program 2013159654 (NSF GRFP) and from the UNC Institute for the Environment’s Center for Watershed Science and Management. All data from this analysis can be found through the following datasets: Moody’s Water and Sewer Municipal Financial Ratio Analysis database (http://www.moodysanalytics.com/Microsites/CRRM/2015/ Moodys-Municipal-Financial-Ratio-Analysis-MFRA), United States Geological Survey Statistics (USGS) (https://waterservices.usgs.gov/rest/Statistics-Service-Test-Tool.html), and National Oceanic and Atmospheric Administration (NOAA) (https://www7.ncdc.noaa.gov/CDO/ CDODivisionalSelect.jsp#). There are no financial conflicts of interest for any authors.

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CHAPTER 3: MITIGATING DROUGHT-RELATED FINANCIAL RISKS FOR