New guidance for investors to tackle water risk

Ceres, in collaboration with its partners, published two new resources to its Investor Water Toolkit to help institutional investors better assess and manage water risks and improve engagement with portfolio companies on these risks. Ceres’ Robin Miller explains in this Guest Blog. 

Earlier this year, United Nations Secretary General António Guterres said we are “alarmingly off track” to achieve the targets laid out in Sustainable Development Goal 6 (SDG 6) to ensure global water availability and sustainable water management.

A larger world population, rapidly warming planet and increasing levels of pollution are all threatening our global water supplies. While more institutional investors are stepping up to confront this challenge, only a few have taken into account the impacts that their investment and financing decisions have on water quantity and quality. 

Investors can and should do more. Given the financial and material impacts of water-related risks are poorly understood by many investors, Ceres, in collaboration with the Swiss Federal Office of the Environment and the consultancy South Pole, published two new resources in June 2020 that provide detailed guidance for investors on how to better assess and manage these risks from both a portfolio-level lens and company-specific lens.

The resources were added to the Ceres Investor Water Toolkit, a comprehensive tool for investors to evaluate and act on portfolio water risks. They include: 

  • Methodology for Water Risk Assessments of Equity Portfolios is a technical report that highlights methodologies for approaching water risk assessment from both a company-specific lens and a portfolio-level lens. It also analyzes current water-related scenarios and outlines recommendations for improving the level of analysis and assessment, including using a scorecard methodology and integrating WRI’s Aqueduct data to evaluate water risk. It can be found in the Portfolio and Asset Class Analysis Section of the Investor Water Toolkit.

  • Investor Guide on Basin Water Security Engagement: Aligning with SDG 6 details the “understand-design-act” approach to working with portfolio companies on water security. The Guide also includes a case study from ACTIAM, a Dutch investor with $75 billion in assets under management and member of the Ceres Investor Water Hub, that describes its approach to incorporating water risk into its engagement process. You can find it in the Engagement Section of the Investor Water Toolkit, along with a video recording of a webinar about the new resource.

While the new resources were developed with investors and development finance institutions in mind, they can be important tools for companies and other stakeholders to better understand the issues investors are raising through scenario analysis and in engagements with companies on water risks.

Robin Miller is a manager of investor engagement at Ceres, a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy.