World Water Day: investor action on water
Many people will have seen the film, The Big Short. The movie focuses on the 2008 financial crisis; in it, one of the men who predicted the collapse of the housing market, Michael Burry, states that he will start focusing his trading on one thing: water. Why?
The UN’s 2016 Water Development Report estimates that 1.5 billion people – half of the world’s workers, are employed by and depend on water-related sectors. A further 36% is moderately dependent on water. Based on this, over 75% of jobs around the world depend on a sustainable water supply.
The economic impact of failing to adequately manage water risks is severe. Water crises have ranked as one of the World Economic Forum’s top five most significant global risks for the past six years. It’s clear why:
- according to a 2016 Sustainalytics report, by 2030, global water demand is estimated to exceed global water supply by 2,700 billion cubic metres;
- the same report found that only 1,100 listed companies, out of a global investable universe of roughly 70,000, disclose their annual water consumption.
what’s the pri doing?
The PRI launched a collaborative engagement on water risks in the agricultural supply chain in 2014. This attracted 40 investors with $5.1 trillion in assets under management.
For the past two and a half years, it has engaged 46 food, beverage and agricultural products companies on various aspects of water risk.
Initial findings from the engagement show that 41 engagement meetings were held. Investors part of the group identified leaders and laggards in company supply chain management of water risks. They have also collated a number of good practice examples by companies. This, along with other efforts, have meant that an additional five companies now report to the CDP. More detailed findings from the engagement will be published in an outcomes document due out in Autumn.
A wave of investor action
Signatories have also addressed water as an investment issue. There have been numerous initiatives in the past year encouraging companies to disclose more information on how they address water risks:
- PGGM, ACTIAM and British Columbia Investment Management have all led initiatives encouraging companies to disclose to the CDP Water questionnaire. These, along with other efforts, have meant that an additional 5 companies now report to CDP.
- Ceres coordinated an engagement targeting major players in the meat sector, which was backed by 45 investors.
Investors interested in learning more can join engagements through the PRI’s Collaboration Platform. Once published, signatories can also use the PRI’s outcome document on water risks in their own engagement activities with companies.