Water pollution should be viewed as financial risk, investors warn

17th August 2022


Investors managing $9.8trn (£8trn) in assets have joined a new campaign urging 72 of the world’s biggest corporate water users and polluters to value and act on water as a financial risk.

The Valuing Water Finance Initiative describes fresh water as the “world’s most precious natural resource”, and provides investors with the tools needed to “make the case” for prioritising water risk when engaging with investee companies.

This includes a set of six science-based, actionable Corporate Expectations for Valuing Water, which are aligned with the UN’s 2030 Sustainable Development Goal for Water (SDG6).

Signatories include pension funds and other financial institutions, such as Aviva Investors and Fidelity International.

Mindy Lubber, CEO of non-profit organisation Ceres, which launched the initiative, said: “The water crisis is playing out across the US and around the world in many ways, from severe drought and pollution to inadequate access to safe drinking water, all of which disproportionately impact our most vulnerable communities.

“The private sector must recognise water’s importance for their institutions and investments lest they further expose themselves and society to increased material water risk.

“We need more investors to step up and join us in supporting the Corporate Expectations for Valuing Water and engaging with the companies they own on water stewardship.”

Ceres highlighted how the water crisis is exacerbated by climate change, making it even more urgent to drive capital market actors – including large institutional investors and major corporations – to improve water stewardship.

The six expectations for investors to deploy in their engagement with investee companies include:

  1. Water quantity: companies do not negatively impact water availability in water-scarce areas across their value chain
  2. Water quality: companies do not negatively impact water quality across their value chain
  3. Ecosystem protection: companies do not contribute to the conversion of natural ecosystems critical to freshwater supplies and aquatic biodiversity and actively work to restore degraded habitats that their businesses depend upon
  4. Access to water and sanitation: companies contribute to the social, economic and ecological resilience of communities they interact with by contributing to achieving universal and equitable access to water, sanitation and hygiene across their value chain
  5. Board oversight: corporate boards and senior management oversee water management efforts
  6. Public policy engagement: companies ensure that all public policy engagement and lobbying activities are aligned with sustainable water resource management outcomes

The initiative and expectations were guided by an advisory council of major investors, including members of the Valuing Water Finance Task Force and other investor and NGO partners.

“The world’s fresh water supply is under severe stress in all regions, which poses risks not just to local communities, but also to those companies reliant upon water across their value chains,” said Anne Simpson, Ceres board member and global head of sustainability at Franklin Templeton.

“Investors have a critical role to play in helping companies assess those risks, and to respond to the opportunities ahead as we build resilience to climate change.

“The Valuing Water Finance Initiative reflects investors’ fiduciary duty to generate sustainable risk-adjusted returns on behalf of the millions of people who rely upon those investments for their financial security.

“Benjamin Franklin wisely commented that ‘when the well is dry, we know the worth of water.’ We are perilously close to that point, and as fiduciaries, must act.”

Image credit: iStock

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