In many parts of the world, water is increasingly scarce due to the confluence of population growth, urbanization and climate change. That makes water supplies a growing concern for business investors.
Wall Street appears well aware of the investment opportunities in water supply infrastructure, waste water treatment, and demand management technologies. However, much less attention has been paid to the risks faced by those sectors that rely on clean water as an input into supply chains or production processes, or have waste water as an output.
The issue gets great treatment by Aline van Duyn in the Financial Times and Holly Hubbard Preston in the International Herald Tribune. Both mention a recent report assembled with contributions from WRI’s Capital Markets research team.
That report, [Watching Water: a Guide to Evaluating Corporate Risks in a Thirsty World](node/9848) produced by JPMorgan Global Equity Research with WRI, explores water scarcity as an emerging investment issue and suggests ways for investors to better account for water-related risks.
These risks are obvious in industries such as agriculture, but they are looming large in other sectors such as power generation, manufacturing, or food and beverages.
The possible impacts from greater water scarcity include the disruption of supply chains or production processes, higher water costs , more stringent (and expensive) government regulation, and the delay or suppression of further growth.
Because corporate disclosure of water-related risks is seriously inadequate, the financial implications of water scarcity are as yet often difficult to determine.
What data there is tends to be included in environmental statements prepared for public relations purposes rather than in the regulatory filings on which most investors rely.
[Watching Water](node/9848) concludes that companies will come under pressure to provide more relevant disclosure on water-related risks—be they physical, regulatory (including legal) or reputational.
Only then can investors include the vulnerability of companies to water scarcity in the valuation of their portfolios.
Piet Klop, Senior FellowPiet is a Senior Fellow with the Markets and Enterprise Program of the World Resources Institute, leading research projects on the valuation and pricing of environmental scarcities by the financial markets and business.
1 Comment
I completely agree with the
I completely agree with the statement above, it is absolutely essential for business that largely depend on water for their opertaions for e.g coke, mineral water companies, paper industries etc to revamp their strategies today to gain in this competitive markets by being early movers..GE effort to save 20% water by 2020 will be a good example to quote.