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New Initiative launches with the backing of major investors

Ceres, a non-profit organisation, has launched a new initiative entitled ‘Valuing Water Finance’. The organisation states that it works with influential capital market leaders via networks and global collaborations of investors, companies and other non-profits[i] to create a sustainable future. To date, the initiative has seen the backing of major investors, with 72 of the world’s biggest companies, including Unilever, Nestle, Danone and Amazon, to offer new guidelines to act on water-related issues. The initiative comes at a time when global water usage is under increased pressure and scrutiny, with several major drought events impacting the world this year, including Europe (reportedly the worst in 500 years[ii]) and North America. The issue is pertinent, with a recent UNCCD report, Drought in numbers 2022, released in May this year, highlighting several startling statistics, including:

• Since 2000, the number and duration of droughts have risen by 29%
• From 1970 to 2019, weather, climate and water hazards accounted for 50% of disasters and 45% of disaster-related deaths, mostly in developing countries
• Droughts represent 15% of natural disasters but took the largest human toll, approximately 650,000 deaths from 1970-2019
• From 1998 to 2017, droughts caused global economic losses of roughly USD 124 billion
• In 2022, more than 2.3 billion people face water stress; almost 160 million children are exposed to severe and prolonged droughts

The World Economic Forum consistently ranks water crises in its top 5 global risks by impact. At the same time, CDP reported maximum financial impacts of water risks at US$301 billion – five times higher than the cost of addressing them (US$55 billion)[iii].

Financial Institutions under scrutiny

At COP26 in November 2021, the CDP (Carbon Disclosure Project) unveiled a water risk reporting framework for financial institutions- utilising 2020 data from 2,934 businesses and representing roughly 67% of listed companies globally. The CDP has since tracked the exposure of financial institutions in relation to water risks as part of its water security questionnaire. However, according to Edie.net, the levels of disclosure remain mixed, thus hampering the financial sector’s ability to draw meaningful comparisons:

“Private investors managing $110trn of assets collectively support the CDP’s water security questionnaire, with the organisation also stating that 66 central banks are now measuring water risks from corporates. However, 70% of financial institutions engaged with CDP either did not respond or indicated that they do not assess water risks for any of their portfolios, with a lack of data access being a key barrier.”[iv]

What does the Valuing Water Finance Initiative propose?

According to Ceres, The Valuing Water Finance Initiative seeks to engage companies with a high water footprint in order to value and act on water as a financial risk, ultimately driving the change to better protect water systems. The initiative calls on companies to meet so-called ‘Corporate Expectations for Valuing Water’ that Ceres say align with the United Nations’ 2030 Sustainable Development Goal for Water (SDG6) and the actions laid out in the Ceres Roadmap 2030[v].

The six Expectations are as follows:

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 WASH 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 six expectations have been guided by an advisory council of major investors, including members of the Valuing Water Finance Task Force, which includes: AustralianSuper, California State Controller Betty T. Yee, Cathay Financial Holdings, Franklin Templeton Investments, PGGM Investments, Sweden’s Skandinaviska Enskilda Banken (SEB), and others.

On the initiative, Ceres’ chief executive Mindy Lubber has said:

“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 are grateful to see so many investors signing on to the Ceres Valuing Water Finance Initiative at its launch, but 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.”[vi]

References

[i] About Us | Ceres

[ii] Drought reveals ‘hunger stones’ in River Elbe historically used to forecast famine | The Independent

[iii] The Valuing Water Initiative announces partnership with CDP, Mercer and the Water Footprint Network to accelerate water-related transparency and action for the financial sector - Valuing Water Initiative

[iv] Valuing Water Finance Initiative: Investors call on corporate giants to step up water stewardship - edie

[v] Valuing Water Finance Initiative | Ceres

[vi] Ibid

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