Water concerns going mainstream, says Jantzi-Sustainalytics

Last year’s launch of the Carbon Disclosure Project’s Water Disclosure Initiative is “the surest sign to date” that investors are increasingly concerned about the impacts of water scarcity and pollution, according to a recently-published Jantzi-Sustainalytics commentary: “Water: The Next Carbon.”

The CDP plans to send a questionnaire to the world’s largest 300 companies operating in water intensive sectors. “Investors will use the answers to assess risk and to invest in sustainable water technologies,” says Jantzi-Sustainalytics researcher Kathryn Morrison.

“While it took almost ten years from the CDP launch for carbon to reach the mainstream, it is unlikely that it will take ten years for the water crisis to become material to investors and business owners.”

Water has risen to become a significant material risk for many companies, as well as their investors, the commentary states, noting that Norway’s massive government pension fund, with assets of $456 billion, recently announced new provisions for water management at the companies in which it invests. “Companies will be assessed systematically and individually against criteria specified in the fund’s expectations document on water management, each company receiving a scorecard.”

All businesses should take measure of their exposure to water related opportunities and risks, Morrison writes, adding that companies with significant exposure should develop corporate water strategies, as they have done with greenhouse gas emissions and energy efficiency.

For instance, companies should develop water policies, implement programs and performance targets to ensure proactive management of water impacts and engage with stakeholders on water-related issues, the commentary suggests.

“To date, company reporting on water-related risks has been less than sufficient. There is a lack of discussion pertaining to how a company may be impacted by broader water issues.”

Morrison predicts that the business case for action on water management and risk reduction will likely follow the same path that brought carbon into the mainstream. “Stakeholder and regulatory pressures will increase, in part due to demographic and climate change trends. As a result, some companies’ cost structures, reputations and licences to operate may turn out to be surprisingly linked to their ability to manage water impacts.”