The prosperity required to pay pensions relies on people — and the planet. Climate change has put the planet on investor agendas, and although carbon has taken priority to date, water needs to be next.
For the past five years, the World Economic Forum Global Risks Report has included “water crises” as a top five global risk in terms of impact in the next 10 years. In 2017, four of the five top risks are all connected to water.
The most energy-intensive industry sectors are also the most water-intensive. This article uses research to show how investors face environmental issues in business from both too little water (one billion people live in water-scarce areas) in some regions and industries and sometimes too much water (from storms and flooding).
“The prosperity that has relied on the fuel tank is now draining the water tank.”
This competition for increasingly scarce resources and safe zones from disasters will intensify with increased agriculture and industry demand, water pollution, and rainfall variability. Plus, there are known insurance costs often in the billions of dollars, but there are substantial uninsured gaps.
What can investors do? Assess and reduce business risks connected to environmental issues and seek out new opportunities created by the disruption to the status quo. Sometimes there are potential returns available from infrastructure, technology, and other areas. Asset owners and managers that already have established socially responsible investing processes to integrate environmental, social, and corporate governance (ESG) factors into the investment process are more likely to include water in their business risk assessments — but don’t assume, ask questions.
This article is a good starting point to creating an action plan to protect your business against environmental issues while opening your investments to potential gains.
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