Water scarcity is the new global warming

Greg Koch, who spoke at the Financial Times sustainability conference in New York City on Thursday, issued dire warnings and a call to arms for investors and corporations around the world along with governments.

And he wasn’t alone.

Robert Hormats, Undersecretary of State for Economics, Energy and the Environment says disputes or outright water wars are imminent in the near future.

Here’s why: an increasing population with needs for more energy and food is putting undue demand on the world’s water supply. So much so that by 2025 some two-thirds of the world’s population will experience some type of water shortage, according to myriad estimates.

Water scarcity is even deemed the most immediate environmental risk to the world, according to Usha Rao-Monari, the global head of water, global infrastructure and natural resources for the International Finance Corporation.

There are two sorts of water risks, she says: physical risk, which is not having enough water at the source, and economic risk, which is the cost of moving water around.

Both are extreme and being experienced throughout the world right now.

In terms of solutions, Rao-Monari sees three: financial, innovation, and government policy. Each of these can play a critical role in water quality and delivery.

Not long ago, climate change and carbon emissions were the environmental demons knocking at our doors. The Carbon Disclosure Project sprung up out of this threat to measure, disclosure and share information among companies. Now it’s water.

The CDP also has a growing water initiative where companies report their water policies. The CDP Water Disclosure Global Report 2011 finds that 57% of the 190 publicly listed organizations that participated in the survey report board-level oversight of water policies, strategies, or plans. By comparison, a report released by CDP in September 2011 showed that 94% of Global 500 companies report board-level oversight of climate change, suggesting that corporate understanding of water as a business concern trails that of climate change.

To enhance investor analysis of corporate water risk and to support corporate action on water stewardship, CERES, the Boston-based coalition of environmental organizations and corporations, developed a go-to water gauge. Backed by investors managing over $2 trillion in assets, the “Aqua Gauge” provides a benchmark for best practice and enables investors to assess, scorecard and compare companies on their management of water risk.

Brooke Barton, the senior manager for water and corporate programs at Ceres, says “investors need to get water on their governance agenda.” This includes not only, say, how water scarcity would affect a beverage maker or food producer, but also municipalities via their bond offerings. If water rates change due to shrinking supply, rates would likely rise and bond prices, in turn, lower.

I have long been vocal about the need for water conservation, efficiency, and management. In the developing world this is especially needed. Geography plays a huge role in water accessibility.

 

One of the biggest opportunities for social as well as environmental impact is through water investing.

Bennett Freeman, senior vice president for sustainability research and policy for Calvert Investments, notes that China holds 21% of the world’s population but only 7% of global water supply. Its water needs are massive. Therefore, water investment opportunities are massive.

Water is life

The entire developing world, as it develops, will need more water. The oil, gas, and timber industries in Africa, for example, take supply away from the direct consumption needs of freshwater supply. Management will be key to growth and prosperity.

And while the U.S. experiences water shortages throughout a majority of states, there is relative access to fresh water. It’s this skill of management and technology that could be a major U.S. export. Yet, we squander much of our skills and management.

Hormats says this is wrong. The State Department is seeking to export these skills in conjunction with the private sector, he says. “There is an important opportunity for the State Department to work with private companies and help other countries purify and manage [their water],” Hormats says.

Rao-Monari says that one of the first things that should be done is to put a price on water. She is right. There needs to be a base line from which we can manage water. It can exact incentives and penalties — a tool for better management.

Water is both a risk and an opportunity. Tech entrepreneurs and innovators take note. Billions of dollars worth of municipal and private projects are coming down the pike (Barton at CERES mentions projects in Nevada, Utah, and Colorado). And that’s just here in America.

Without water there is no energy. Without water there is no food. Without water, in other words, there is no life. Seems like that should be enough of a risk to warrant more attention.

As Koch pointed out, this isn’t a risk happening in the future. We’re dealing with these risks now.

Many people from around the world who came to the FT Sustainable conference agreed.

Water isn’t everywhere and there isn’t always a drop to drink. We need to invest in programs that find ways to get more.

marketwatch