The Next Economy
New Reports Say Sustainable Investment Can Stabilize Global Water Risk, European Economy

This week, non-profits Ceres and WWF published resources that provide guidelines for how strategic investment at the private and public level can help avert environmental and economic crises felt the world over. The reports also present compelling arguments for how said environmental crises fuel — and could easily eclipse — the global economic crisis.

On Tuesday, Ceres released a report and cheat sheet (right) designed to help global investors improve their analysis and decision-making with regards to water scarcity.

Based on interviews with dozens of institutional investors and water experts around the world, An Investor Handbook for Water Risk Integration summarizes existing practices for integrating environment, social and governance (ESG) issues — and water issues, in particular — into mainstream investment strategies. It includes specific recommendations for how global investors can factor water into investment policies, portfolio management, strategic planning and client relationship building.

"Global water risks are a growing threat to companies, bond issuers, infrastructure and the broader economy, but most investors aren’t yet rigorously evaluating how these issues could affect their portfolios," said Monika Freyman, CFA and water expert at Ceres, and author of the report.

"Although there have been many reports raising awareness of material sustainability risks, few reports outline in such detail steps investors can take to influence the management of these risks and opportunities," said Michael McCauley, senior officer of Investment Programs & Governance at the Florida State Board of Administration, which manages more than $180 billion of assets for Florida’s retirees, who wrote the report foreword.

Also on Tuesday, WWF launched a new report that outlines how resource efficiency alone could generate over €300 billion per year for the EU economy — the equivalent of European Commission president Jean-Claude Juncker’s Investment Plan to boost economic activity and job creation.

WWF launched From crisis to opportunity: Five steps to sustainable European economies just as the 28 European Economic and Finance Ministers met in Brussels to agree on the new €315 billion European Fund for Strategic Investments (EFSI) proposed by President Juncker. In line with key findings from the European Environment Agency‘s (EEA) 2015 State of the Environment report, WWF’s report shows that the emerging ecological disaster is very likely to dwarf the current economic crisis.

Damages from floods have cost more than €150 billion over the past 10 years, air pollution costs around €537 billion every year and EU industries import every year more than €300 billion in raw materials are no longer available in Europe.

The report references over 400 studies and reports by key institutions such as the OECD, UNEP, World Bank, IMF, ILO and the EU Commission, economic advisors including McKinsey and Ecofys, and leading world economists such as Lord Stern, Pavan Sukhdev and even Simon Kuznets, the “father of GDP” — all leading to one conclusion: Building a sustainable economy will more than offset the costs of dismantling the brown economy.

WWF’s report presents a five-step policy roadmap for Europe to build sustainable economies focused on achievable goals in the next five years. Five key enabling frameworks should be integrated to deliver maximum results: climate and energy, resource efficiency and management, fiscal and financial policies, global sustainable development leadership and an overarching new strategy for Europe from now to 2050.

“Instead of the short-term ‘grow dirty and clean up later’ flawed narrative, President Juncker and EU leaders should look at the real symptoms of our troubled economies: diminishing natural resources and markets failing to take this into account,” Godinot said. “It’s simple: No economy can develop without natural resources.”

While corporate and government buy-in to the need for sustainable investment may continue to lag, private investors worldwide are more aware than ever of the importance of long-term sustainability strategies and are making their concerns known: A report released last month by the Global Sustainable Investment Alliance revealed the global sustainable investment market has grown “substantially” in the past two years, with assets employing sustainable investing strategies rising from 21.5 percent to 30.2 percent (totaling $21.4 trillion) of the professional management assets across the regions covered by the start of 2014; and As You Sow’s 10th annual Proxy Preview report, released last week, details the record-breaking 433 social and environmental shareholder resolutions filed so far this year.