Now, A New Risk for Your Portfolio: Water

  • 10.11.2022
  • Morningstar

Morningstar: Here’s a scary statistic: Water demand might actually exceed supply by 56% by 2030. Today, 85% of wastewater worldwide is leaving facilities, households, and farms untreated because of a lack of water infrastructure, public financing, or proper regulatory compliance. That isn’t good news, since climate change is already exacerbating who has access to this life-giving, irreplaceable resource.

Businesses and their supply chains rely on water, too. But they are facing increasing competition with each other, and with communities and ecosystems, for water, especially at locations with high or severe water stress. According to the World Bank, failure to implement better water-management policies has the potential to reduce spur migration and spark conflict. For investors, this means that water is a crucial sustainability issue to watch.

Inconsistent disclosure practices—and in many cases an outright lack of disclosure—by companies regarding their use of water has compounded the measurement problems related to this critical issue. That presents challenges to investors seeking to fully comprehend water-related risk.