When replacing a water heater or furnace, it is often necessary to replace the vent connector as well. The vent connector is the pipe that connects the appliance to the chimney.
If the correct size pipe is not present on an appliance, there is a good chance that the combustion gasses from the appliance will not leave the building. This is unsafe.
The draft hood that is supplied by the manufacturer is usually the size the vent connector needs to be. The photo shown above has a smaller draft hood than the vent connector and there is condensation and corrosion on the draft hood. Those stains along with the rust and missing escutcheon plates make me believe this water heater has been backdrafting for a long time.