This is the third consecutive year China Water Risk has taken part in World Water Week in Stockholm. As like previous years there was over 3,000 participants from well over 100 countries. This year the theme was “Water for Sustainable Growth”.
China Water Risk co-convened/was a panellist at two seminars:
- Making sound energy choices today to achieve water security tomorrow: This seminar was convened by China Water Risk, the Institute for Advanced Sustainability Studies (IASS) and the Global Water Partnership (GWP). The seminar focused on the need for wiser water management in the energy sector in order to achieve sustainable growth. Case studies from around the world including China, Africa, India and others were shared by China Water Risk, Greenpeace and GWP (see more details here).
- Catalysing natural capital financing for water security: China Water Risk was a panellist in this seminar. The discussion focused on enabling conditions for financing and bridging the gap.
Of our three years of attendance, there was the most discussion on finance and business this year. This was clear from the get go with the opening plenary, where the panellists raised these topics; saying that it’s important to question not just what to finance but also what not to finance. Seminars, workshops & lunch panels also reflected this increased focus on finance and business.
The above plus discussions during the week show that attention on corporate exposure to water, be it availability, pollution, climate change, glacial, groundwater & more is rising on agendas.
Here are 3 key takeaways from World Water Week 2016:
1. More focus on corporates and water
This year one of the full-day workshops was solely focused on water stewardship & business, “Water Stewardship: A Driver for Business Growth”. This involved various MNCs, a consulting firm, IGOs, NGOs and other organisations.
The workshop closed with a question, “What is the brand value from water stewardship?”
It was apparent that some brands are highly valuing water stewardship be it for reputation and/or strategic reasons..
…to some extent all corporates are exposed to water
It was apparent during the day that some brands are highly valuing water stewardship be it for reputation and/or strategic reasons. AB InBev has eight environmental goals, three of which are related to water. These goals are led by corresponding business units, for which there are targets. Employees’ performance against these targets impacts their bonuses. Another water-related development is their “smart barley”, which includes 40+ key performance indicators for the production of the barley they purchase. These cover water, soil & much more.
Intel is another example. They are revamping their water strategy as they have found water to be such a focus in their operations. Then there is Sanofi, which is completing water life cycle assessments in its supply chain. Meanwhile, Veolia shared opportunities. For example, a company that shows it is water resilient could reduce insurance costs by $50 million.
These multi-industry examples show just how much water is a cross-cutting resource and that to some extent all corporates are exposed to water. The full picture of this exposure needs to be addressed, as Sybille Roehrkasten from IASS mentioned during our seminar, when factoring in water usually the focus is on synergies and win-wins but this isn’t always the case, “…we also need to talk about trade-offs, there are imbalances“.
2. Increasing transparency trend, plus more questions & wants from investors
Globally there is a growing trend of increasing transparency and disclosure. As the Carbon Disclosure Project (CDP) showed at the week the number of companies disclosing to it is growing and water awareness (be it seen as a risk or opportunity) is also growing.
Common disclosure and common requirements on water are key for attracting the finance sector but at the moment they just don’t exist. As said by Naina Lal Kidwai, former Chairperson of HSBC India, at the opening plenary, “In my bank, HSBC … they looked at risk, they looked at water but the provision of water audit transparency, disclosure, what are you measuring, just isn’t there at the corporate level. So what are these mandatory risk or water audits we require?”
The lack of common standards is echoed by Asit Biswas & Cecilia Tortajada here. They were also in Stockholm.
“…the provision of water audit transparency, disclosure, what are you measuring, just isn’t there at the corporate level. So what are these mandatory risk or water audits we require?”
Naina Lal Kidwai, former Chairperson of HSBC India
Existing water-risk valuation tools were touched upon. One of the outcomes was that despite the various existing tools, new benchmarking tools are still required. Indeed our own research and investor feedback showed that 61% – 90% of the 70+ investors surveyed had never heard of these tools. This may be in part due to communication issues; business & investors want few but comprehensive datasets to work with, meanwhile water professionals want water valuations to take into consideration all the intricacies of water plus additional local implications.
The focus of indices and credit companies on water was also discussed, though to no overall outcome. Intel’s Stephen Harper said “There’s a thousand flower blooming, with a thousand ratings.” This followed him highlighting that Intel manufactures its own chips whilst Apple & Dell outsource, so Intel automatically have a much larger environmental footprint, which is not necessarily accurately reflected in their ratings on various environmental focused market indices.
“Regulatory & reputational risks are increasing and need to be talked about more.”
Will Sarni, Deloitte
A positive note was to hear that investors are asking corporates more questions about water. Interestingly, these started environmentally focused but now also include social aspects. This aligns with increased discussion on one’s “license to water”. This license obviously includes a physical attribute but more and more has regulatory and reputational implications. As warned by Will Sarni of Deloitte, “Regulatory and reputational risks are increasing and need to be talked about more.” Again, our recent report supports this view – more on what investors say here.
3. Need to align business with SDG 6
The Sustainable Development Goals (SDGs), which replaced the Millennium Development Goals last year, was a key issue of the week. The difference between last year and this year is now the conversation has shifted from water having its own SDG (No. 6 – “Ensure availability and sustainable management of water and sanitation for all”) to how do align business and SDG 6.
This year the conversation has shifted from water having its own SDG to how do align business & SDG 6
Corporate response to the need to and how to align business with SDG 6 varied from “there is no evidence for SDG 6 to link to business”, to “it’s too early” and “we will seek to compliment with SDG 6 as we continue with our work”.
Work to align business and the SDGs is underway. There is a UN designated task force working on this now. Also, there is the High Level Panel on Water, established earlier this year by UN Secretary General Ban Ki-moon and World Bank President Jim Kim, with the aim of furthering water-related SDGs. Representatives from the Panel spoke during the week. Though, they were primarily there to listen and get feedback. The Panel’s action plan will be presented on September 21 in New York.
A potential impetus for business to act on aligning itself is that prevention work could not only save money but also make money, as discussed in the Water Prize Ceremony. “We are starting to see people make a lot of money dealing in shit, some of them already having made millions while simultaneously contributing to the common good”, said Naina Lal Kidwai. This essence of missed opportunities was also spoken about during the week.
“Business realises it can’t do it alone”
Joppe Cramwinckel, WBCSD
Collective action will be key to successfully aligning business and the SDGs – no easy task, though it seems more feasible now as “Business realises it can’t do it alone”, said Joppe Cramwinckel of the World Business Council for Sustainable Development. There are many issues: as the CEO & Founder of Earth Security Group, Alejandro Litovsky warns “the depletion of aquifers is creating a geopolitical challenge that is beyond a corporation’s sole ability to fix. It is a risk so great, countries and multinationals must come together to collaborate on solutions.” More on what he has to say here.
On top of this, it was noted that the SDGs need to be implemented in a way that compliments the Paris Climate Agreement.
It was a busy week as ever, “the Olympics of water”, as the Guardian’s John Vidal said. Significant challenges remain, such as the low price of water and growing ones, like migration. It’s clear we need more work on common disclosure and risk valuations. But we now, with the SDGs and the Paris Climate Agreement, have a mandate and framework prioritising the environment, including water, like never before. At COP 22 in November there will a special day to highlight water issues. Development, business, finance, environment and policy agendas are truly converging.
“We need to learn to do more with less”, said by Ezgi Barcenas from AB InBev. And with that, next year’s theme at World Water Week is “Water and Waste – reduce and reuse”.
The report details investors’ feedback on various water risk valuation approaches: shadow pricing’s impact on P&L, balance sheet exposure to water stress and regulatory risks & compliance costs
10 listed energy majors operating in China have been analysed: five in coal mining and five in power generation. 70+ investment professionals/asset owners across various asset types (“Investors”) from more than 50 financial institutions/funds provided feedback on the results.
- Water Risk Valuation – What Investors Say - See what 70+ investors have to say on different valuation approaches we applied to 10 energy stocks listed across 4 exchanges. Is there consensus? What are they most worried about?
- Banking in the Age of Water Risk - Are water risks and their potential impacts factored in by banks? Or is ‘water exposure’ just the water used in their office buildings & branches? Tan says prudence dictates we must start to waterproof portfolios
- Managing the World’s Liquid Asset – Water - Savvy investors now recognise water as a business risk yet there is still no agreed global standard & framework for sustainability reporting. Biswas, Tortajada & Chandler on why corporates & governments must do more to change the culture & mindset over the use of water
- Corporate Leadership For Depleting Aquifers - Earth Security Group’s CEO brief warns that depletion of aquifers is creating systemic business risks and geopolitical challenges. See why authors Litovsky & Hill Clarvis think these are risks so great that countries & MNCs must come together to collaborate on solutions
- Yangtze Headwaters Under Threat - By the end of the century, 67% of China’s ice may be gone. Can the Yangtze survive? As temperatures rise, the glaciers which sustain Asia’s longest river are reaching the tipping point. Sam Inglis explores the headwaters, as we march towards an ice-free Yangtze
- 2015 World Water Week: Key Takeaways - What’s water’s role in sustainable development? How can we ensure water for all? China Water Risk’s McGregor on this, how Asia is fairing, the Sustainable Development Goals & more from World Water Week 2015
- 2014 World Water Week: Takeaways – Check our key takeaways on ‘Water & Energy’ from World Water Week 2014. What are the challenges ahead for Asia & the rest of the world? Dawn McGregor expands