Similarly, some 12.3% of companies now disclose water consumption, versus only 3% of companies previously. For example, 16.6% of companies within Sustainalytics’ global coverage disclosed data on water withdrawal in fiscal 2020/2021, compared with only 7% we reported on last year. That presents challenges to investors seeking to fully comprehend water-related risk. Inconsistent disclosure practices-and in many cases an outright lack of disclosure-by companies regarding their use of water has compounded the measurement problems related to this critical issue. Improving Water-Related Disclosures Will Be Key for Investors As disclosures have improved over the past year, we can revisit this framework to better understand which industries face the greater related risk. We shared our views and suggested approaches in a previous article last year, where we presented a handful of useful metrics that investors can use to determine a company’s reliance on water in its operations, and how the location of a company’s operations further influence the level of water-related risk it faces. During Egypt’s COP27 presidency, you might expect a focus on water and climate adaptation as key priorities for multi-stakeholder actions and partnerships between governments, businesses, innovators, and other important actors. That will affect Africa and other climate-vulnerable regions acutely. The Intergovernmental Panel on Climate Change reports that 3 billion people could face physical water scarcity with 2C of global temperature rise. Water plays a key role in meeting the goals of the Paris Agreement and in supporting science-based global climate action. The same alertness that is paid to carbon emissions is needed for the water side of the equation. For investors, this means that water is a crucial sustainability issue to watch.ĭespite the paramount importance of water, the risks that water scarcity or poor quality pose to economies and businesses have received less attention from investors than they deserve, when compared with carbon.
According to the World Bank, failure to implement better water-management policies has the potential to reduce spur migration and spark conflict.
But they are facing increasing competition with each other, and with communities and ecosystems, for water, especially at locations with high or severe water stress. Businesses and their supply chains rely on water, too.
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