From black to blue: Understanding water-stress exposure in an investment portfolio
Responsible investing: Moving the climate focus beyond carbon and on to water.
The impact of water-related risks on communities is potentially catastrophic, given water’s place as a critical input to all facets of life. It is this that makes risks related to water multi-dimensional. Furthermore, not only do we need to know how much water is used (i.e. volume), but we also need to plot that against where the unit of water is used (location).
The reasonableness of producing a portfolio-wide water metric is less clear than in the case of carbon footprint.
Water risks are regional, multi-dimensional and very distinct from carbon. In researching how to incorporate water issues systematically into an investment portfolio we have identified:
The who, what, why and how of water-related investment themes
Four key considerations for investors seeking to incorporate water into their portfolio
Existing water-based frameworks and data sets are inadequate. Use our decision-tree approach to enhance decision making
Water risks are distinct from carbon – introducing physical risks
Unlike carbon risks, water-related risks primarily relate to physical risks associated with climate change. Physical risks can be broken down into direct and indirect. Physical risks include direct damage to assets while indirect risks cover supply chain disruptions and water availability, for example.
Details of the methodology and analysis used in our research is included in the full research paper. Complete this form to request a copy of the full report.
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A lot of work has gone into identifying how carbon can be measured, managed and invested in for tomorrow’s green economy. But there is more to the “E” in environmental than carbon. Here we ask: “what is the next big thing in the environmental space?”– for us, it’s water.
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