For investors, companies and governments seeking to assess water risk exposure, there are more solutions than ever to dig deep for water data and evaluate their supply chains.

There is certainly urgent need for it. The global economy, indeed humanity, can’t exist without water. From the rapidly melting ice sheet in Greenland pushing sea levels higher and faster than scientists thought to the near-total loss of water access in Indian cities like Chennai stemming from pollution and drought, the planet faces major water crises.

Tracking water data isn’t as straightforward as carbon emissions, but it’s slowly improving largely because of better disclosure through databases like the global disclosure system run by nonprofit CDP and new tools like the World Resource Institute’s Aqueduct Water Risk Atlas, updated this month.

A report accompanying the new WRI tool shows the importance of this information. A quarter of the world’s population faces a looming water crisis, and the rest of the world isn’t far behind.

“Water stress is the biggest crisis no one is talking about,” said WRI CEO Andrew Steer, in a statement. “Its consequences are in plain sight in the form of food insecurity, conflict and migration, and financial instability.”

The Aqueduct Water Risk Atlas’ 13 measures include water depletion, groundwater tables, drought risk, changing seasonal variability, wastewater collection, drinking water, sanitation and even reputational risk, an important ESG criteria. New additions for 2019 include monthly snapshots of water stress and the variability of groundwater resources.

Companies, governments and investors use the tool to evaluate water risk exposure across 189 countries. The information can help them plot locations for new factories and facilities like power plants and evaluate their supply chains.

Where to look for the data

In 2018, 50,000 people used the WRI tool to determine water risk. And some 300 companies used the atlas to gather data for disclosure via CDP’s database. CDP is the former Carbon Disclosure Project, renamed in 2011 when the NGO added water.

Last year, 650 institutional investors signed onto a CDP request to more than 1,500 publicly-traded companies for water-related information. More than half responded and are “demonstrating some progress towards key aspects of water management,” according to CDP. It’s a number that’s climbed steadily since the nonprofit known for tracking carbon uses added water as a category in 2011.

Most non-drinking water withdrawals come from agricultural supply chains in one way or another, with another 19% from industry, according to CDP. 

Of the roughly 300 firms CDP tracked for water use over four years, some 75% now report water risk exposure, up from 70%. Yet in that same timeframe, nearly half withdrew more water from the planet, either on the surface or from aquifers. Water-related financial losses in 2018 reached some $36 billion, according to CDP. 

That’s a huge concern, and one both traditional and ESG investors are waking up to, Emily Kreps, the global director of Investor Initiatives at CDP,  told Karma. There’s increased understanding of the need to transition, even if many firms have not yet acted on it, she said.

“We’re concerned because we haven’t necessarily seen companies transition their water usage,” Kreps said. “In fact, if anything, we’ve actually seen an increase.”

Knowing where a company’s supply chain faces risk, whether it be via agriculture, mining, placement of a factory or even daily water use, can help investors figure out a bigger picture.

Some companies are working to slash their water use. Ford, for example, got an “A” grade from the latest CDP rating for companies because of its water use reduction. Procter & Gamble is working to give more than one billion consumers access to more water-efficient products, according to WRI.

One place for an individual investor to begin is with an investment or wealth manager, Monika Freyman, the director of investor engagement for sustainability nonprofit Ceres, told Karma. While data isn’t as robust or linear as that NGOs like CDP, WRI and Ceres track for carbon, Freyman recommends investors don’t wait for that kind of detail and start now.

When Ceres began surveying investors about their interest in water information in 2015, just a few dozen expressed an interest. That’s grown to a group of more than 120, including large pension funds and asset managers that are “very quietly, but increasingly, becoming more public on the need to really understand water is becoming critical. And of course it’s so interconnected with climate,” Freyman said.

Water Risk Exposure

In Ceres’ online water “toolkit,” one case study outlines potential water risk exposure for major stock indexes using the Sustainability Accounting Standards Board’s scores for different industries.

Ceres analysis shows more than half of four major benchmark indices – the S&P 500, Russell 3000, MSCI World and MSCI EM – were exposed to “medium to high” water risks.

So if an investor is “holding a lot of industrials, mining metals, food and beverage companies, utilities, energy companies, you probably have a decent amount of water risk exposure,” Freyman said.