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The water industry must consider natural, social and human capital in addition to financial capital in its business planning if it is to address the challenges it faces over the coming years, including population growth and climate change.

Global infrastructure services firm AECOM said water companies tended not to include natural, human and social capital in their planning, but that by identifying and valuing these they could transform the basis on which investment decisions were made.

AECOM pointed out that the water sector faces a myriad of pressures, from population growth to the rise of high-consuming single occupancy households and the impacts of climate change. It also warned that tougher environmental regulatory standards, the need to provide a better service to customers and the potential impact of competition in the domestic market must be considered when considering where to channel its financial resources.

‘While there is growing recognition of the need to include natural capital in expenditure planning, very few organisations in the water sector are yet to fully take account of their investment programmes’ social and human impacts and look at how these capitals can be applied when managing assets,’ said director of asset management Adrian Rees.

Thinking beyond financial considerations requires water companies to take a long-term approach to investment, said AECOM. It highlighted the installation of a new sewer to illustrate how including other forms of capital may could be more beneficial. Whereas the sewer may bring immediate flood prevention benefits, installing sustainable drainage systems as well could provide habitat for biodiversity and improve local air and water quality.

Accounting for these types of factors when deciding between different investment options could support the introduction of measures that deliver multiple benefits by adding to existing natural, social and human capital stocks, AECOM said.

Meanwhile, Thames Water is surveying the land it owns to assess trees and habitats. A database will be created to help manage trees, removing those that are damaged to protect staff and the environment.