Uncharted waters

Water is a crucial part of Earth’s climate system and, as a result, is intrinsically linked to climate change. While water is a victim of climate change, the way we manage and use water can contribute to it. Climate change affects the availability, quality and quantity of water required to meet basic human needs and threatens our human right to access clean water and sanitation. Water-related risks are becoming more immediate and significant, potentially adversely affecting all water users across the globe¹. On the other hand, energy use and greenhouse gas emissions in water supply, treatment and desalination can be significant contributors to global warming.

Water is input to almost all production activities. While specific sectors have unique KPIs, dependency on water is universal. In this landscape, water-resilient investments will be vital, and water data will be necessary for decision-making. Water is an important area for impact investors because water delivers a positive, clear, measurable impact – the trade-off between the benefits and sustainability of water is unambiguous². Water extraction, consumption and discharge are all closely interlinked, and good practice will have a positive chain effect.

Despite its importance, water reporting lags behind carbon reporting with information deficit and disclosure insufficiency. Many companies are still new and ineffective in water management and reporting³. The proprietary ESG Book dataset shows that even the most frequently disclosed metric for water (Quantitative Water Data Disclosure) has a coverage of only 54.91% in 2020, lower than the 65.11% coverage for Scope 3 GHG emissions (Figure 1). Moreover, the carbon reporting paradigm may not apply to water reporting due to water’s multifaceted, unidirectional, and localised nature. Unlike carbon, which can transport and accumulate worldwide, water issues are confined to certain times and geographical areas.

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