Investors give a twist to water risks

Prepare to hear scores of executives blame “drought,” “floods,” and “natural disasters” for poor results in the coming months. To a certain extent, it is understandable: large areas of America, Europe, Asia and Oceania are suffering from too little or too much water, and sometimes both in quick succession. But it’s also tired old language that obscures how this financial damage comes from having long allowed water risks to play second fiddle to greenhouse emissions. Now DWS, Fidelity International, CalPers and 60 other investors with nearly $10 trillion in assets are trying to change it.

The group has just launched the Valuing Water Finance Initiative (VWFI) project. Despite its name, it will target 72 food, beverage, technology and clothing firms, from Inditex to Microsoft, to properly assess their exposure to the resource, as well as to better manage and protect it. It is inspired by Climate Action 100+, a carbon-focused initiative. The NGO Ceres is in both.

It is not that the risks of water are completely ignored. In the past, a smaller campaign led by Ceres has focused on fast-food chains, while another NGO, CDP, has warned that the cost of ignoring aquatic risks costs firms five times more than addressing them. Shareholders are also starting to chide companies for downplaying it. Earlier this month. More than 60% of Tesla independents supported developing a better water strategy. But these resolutions are rare.

There are good examples of corporate action on the issue to build on, such as those by AB InBev, Coca-Cola and Intel, ranging from making their factories water efficient to helping their supply chains and communities in which they operate. Some of these firms are on the initial VWFI target list. It is time for investors to adopt a concerted solution.