Institutional investors need to pay more attention to water as an investment risk or opportunity, advocates say.
When sustainability advocacy group Ceres looked at the four main U.S. stock indexes for water risk, it found significant water risks in more than half of the sectors. Most industries face risks tied to water, such as dwindling sources, higher costs, pollution, climate change, more regulation and increasing competition for it, but most companies also are not paying enough attention to manage these risks for themselves or their investors, Ceres maintains.
Those risks could be material for investors, who will have to step up, according to Ceres. "The global water crisis is a global risk. Investors really need to be key players," said Kirsten James, director of Ceres' water program, which is working to mobilize investors and companies to address sustainability risks from water.
To that end, some investors, including the $318.4 billion California State Teachers' Retirement System, West Sacramento, are leading the Valuing Water Finance Task Force formed by Ceres and the Netherlands government to drive corporate action on water-related financial risks, including better disclosure and water risk management throughout supply chains.