Water-related recommendations for responsible investment
Water remains an underdeveloped topic in responsible investing. This is concerning, given the fundamental role it plays in biodiversity and economic growth, its close connection to climate change impacts, and the fact that access to clean water is a basic human right. A new report provides actionable insights for investors and businesses. From global to local: enhancing ESG data on Water offers water-related recommendations in support of responsible investment.
Actionable insights
The report provides actionable insights for investors and businesses to enhance their understanding of water-related risks and opportunities, facilitating informed decision-making and the development of corporate sustainability strategies.
The report recommends a multifaceted approach that combines data-driven decision-making, collaboration, and innovation. Stakeholders should:
- Enhance place-based data collection and disclosure. Developing and implementing robust systems for collecting comprehensive data on sector-specific water usage and risks is key. This includes addressing sectors that are currently underrepresented in available data.
- Improve asset and supply chain data tracking. Companies should invest in better tracking of their assets and supply chains to understand their water dependencies and risks more accurately. This foundational step is crucial for effective water risk management.
- Engage in collaborative efforts. Industry-wide cooperations and partnerships to share data, improve reporting standards, and develop best practices for water management will enhance water stewardship efforts.
Localised cases
Although Environmental, Social and Governance (ESG) reports usually provide a global view of water-related risks, they often overlook local specifics. Integrating localised insights can significantly enhance the granularity and effectiveness of ESG reporting by offering a more nuanced understanding of regional water challenges.
The report’s findings are illustrated with localised case studies from the economic zones of Chennai (India) and São Paulo (Brazil). The report includes scenario and risk analyses, monthly and average water gaps, and sector-specific assessments of companies in Chennai and São Paulo’s textile, manufacturing, and energy sectors.
It evaluates the current effectiveness of water management strategies and ESG reporting practices, while addressing the benefits and limitations of these practices. A key aspect of the analysis is the integration of localised water risk assessments using two tools: WaterLOUPE, developed by Deltares, and the WWF Water Risk Filter (WRF).
A holistic approach
The report underscores the importance of incorporating localised water risk assessments into ESG reporting frameworks. Tools such as WaterLOUPE and WRF offer detailed, region-specific insights that can improve the accuracy and relevance of water risk management strategies. By integrating these localised assessments, companies can develop more targeted strategies, enhance transparency, and improve communication with stakeholders, ensuring that water management practices are aligned with local conditions and promoting sustainable use.
Moreover, fostering collaboration with stakeholders and engaging in collective action initiatives strengthens relationships and enhances water stewardship efforts. For investors, understanding and assessing water risks enable better financial exposure assessment, resilience evaluation, informed decision-making, and value creation.
By adopting a holistic approach to water risk management, companies and investors can navigate the complex landscape of environmental challenges and contribute to sustainable water management and long-term business resilience.
BRIDGE project
The report is the outcome of the BRIDGE project, which focuses on identifying novel approaches to bridge ESG data gaps and focusing on institutional investors. The project is co-funded by the Top Consortium for Knowledge and Innovation (TKI) Delta Technology, enabled by the Dutch Ministry of Economic Affairs.
The BRIDGE project was carried out by partners from the environmental, research, and financial sectors, including Deltares, World Wildlife Fund (WWF), Achmea Investment Management, NN Group, and SCOR.
Webinar
A webinar presenting the report's findings was also held, and can be watched online.
