Water is a resource everyone needs, but even in the face of scarcity few companies or investors have adequately valued water or planned for limited access. Limited or no access to water was once a distant concept to businesses; it has now become reality for many and a near-term challenge globally. The impacts of water stresses reach across sectors – all companies may face physical, regulatory, or reputational risks if they operate or rely on operations in any water-stressed area. Yet managed risks can become opportunities.
Preparing for the reality of water stresses can position companies to reduce vulnerabilities and outperform competitors. When companies measure their water footprints and disclose this information, both companies and investors benefit. Companies can benchmark against their peers while providing material information to investors. Investors can make informed decisions that maximize returns by incorporating water risks and opportunities into their valuation methods.
This report is intended to inform both businesses and investors about the reality, risks, and opportunities of water stresses. Many real world examples are included to illustrate how water stresses have affected profits and to show what companies and investors are doing to adapt. We provide solutions for both businesses and investors to turn vulnerabilities into value.
- Global Backdrop — Global water resources are becoming increasingly stressed due to a variety of factors. Countries, communities, and companies already are feeling the effect of this stress, which will become progressively more impactful in the future.
- Risks — Water risks may be physical, reputational, or regulatory and will have significant financial implications. Companies are more frequently reporting higher amounts of exposure to these risks. Investors are also exposed.
- Opportunities — Water stress also presents operational, strategic, and market opportunities for businesses and investors. Companies that capture these opportunities better position themselves to outperform their peers.
- Recommended Business Actions — Companies that measure their water use and impact can better manage it. Many tools for companies to assess risks and opportunities exist today, and they can be used to create long-term value. Companies benefit from disclosing information about water risks and strategy.
- Recommended Investor Actions — Investors can reduce risks and improve returns by incorporating environmental factors, including corporate water usage and water stress exposure, into their investment analysis and portfolio-creation process. Several tools exist for investors to analyze company-specific environmental performance. Importantly, investors need to request that all companies measure and report their water usage and impact information.