Water Management Must Be At The Core Of ESG Strategy

Only a tiny fraction of the world's biggest companies are adequately managing the various risks they face from water shortages, drought and pollution, according to new research from independent environmental, social and governance (ESG) research provider EIRIS.

Under a current business-as-usual scenario water demand is set to outstrip supply by 40% by 2030. This has the potential to put USD 63 trillion of global GDP at risk by 2050.

EIRIS' report A drought in your portfolio: are global companies responding to water scarcity? shows that 54% of 2,000 global companies analysed are exposed to water risks but take little or no action to mitigate them. Around half show no evidence of any management response to water risks whatsoever.

EIRIS research findings include:

• 54% of 2,000 global companies are exposed to water risks, but only 0.22% have adequate management systems, policies and reporting mechanisms in place to tackle the risks;
• sectors such as oil & gas, mining, power generators, semi-conductor plants, retail chains and agriculture are heavily reliant on water and show high water risk exposure, and;
• of those companies exposed to water risks only 9.7% have set either short or long-term targets on water consumption. Furthermore, only 9.7% have set targets on water quality.

However, further analysis reveals more promise. 36% of companies have at least acknowledged water as an issue that needs to be addressed and 22% demonstrate that they are monitoring water consumption.

Randeep Sanghera, report author and lead water analyst at EIRIS, said "The era of cheap and easy access to water is coming to end for companies. This poses a potentially far greater threat to business than the loss of other natural resources, including oil, yet the majority of companies and investors remain unaware of the risks they face".

Commenting on the research findings, James Winpenny, a consulting author for UNESCO's World Water Assessment Programme, said "It's clear that water scarcity creates both investment risks and opportunities. Through shareholder activism, investors can ensure that companies are fully aware of the impact of their operations on water, and vice versaon their exposure to water risk. They can also seek investment opportunities from the Green Economy agenda and align their portfolio strategies more closely to this".

"Water management deserves to be at the core of any ESG investment approach. Investors should demand an increased level of reporting on water and encourage companies to put the management of water at the centre of their sustainability strategies" added Sanghera.

Click here to download a copy of EIRIS' Global Water Risk report.

SOURCE: EIRIS