No organization on the planet can operate without water.
It is estimated that by 2030 global water demand will exceed supply by 56 percent. Yet only 32 percent of respondents to the CDP Water Security questionnaire report that they conduct regular water risk assessments to understand their exposure to reputational, regulatory and physical water risks.
Water is as much a business risk as a sustainability risk. As water crises grow in regions across the globe, water considerations need to be integrated into an organization’s risk management process and considered both within that organization’s operations and across its value chain.
Further, organizations aren’t the only ones evaluating water risk; investors are as well. Water is underpriced across the globe and investors are increasingly exploring the impact that this has on investment portfolios. S&P Global Trucost estimates that if Fortune 500 organizations paid a price for water that aligned with its true value, profit margins would shrink by a tenth.
Investors are demanding more transparency from organizations across a range of issues, including water. In a report titled “Troubled Waters,” BlackRock evaluates why water stress has historically been overlooked by investors and why this is likely to change in the years to come.
Additionally, investors are increasingly recognizing that water is embedded within climate risk and thus needs to be integrated into investor expectations, such as the Climate Disclosures Standards Board’s Task Force on Climate-related Financial Disclosures-aligned water guidance, which seeks to improve the quality of water-related disclosures in mainstream reports. This guidance is currently under review by stakeholders, including WSP, and is expected to be published in the spring of 2021.
With investor pressure increasing and risks growing, we expect to see more organizations integrating water into their risk management processes and leveraging insights gained to set goals and strategies to mitigate this risk.