Finance & Investment
Water Stewardship Ramps Up, But More Investment Needed to Mitigate Climate Change

Corresponding with the kickoff of COP23, the World Water Council (WWC) has shed light on the current state of water infrastructure and what it means for mitigating climate change and delivering on the UN Sustainable Development Goals (SDGs). The key takeaway: water infrastructure investment must triple to €255 billion annually in order to meet sanitation targets and tackle climate change.

According to the UN, nearly 80 percent of countries lack sufficient funding to meet national requirements and targets for drinking water and sanitation. With the launch of its report, the WWC urges governments and investors to focus resources on creating new water infrastructure and maintaining and improving existing systems.

“As part of the World Water Council, we seek to encourage continued dialogue between the water and climate communities as well as state and non-state actors for better water management and infrastructure financing with the uncertainty posed by climate change,” said Dogan Altinbilek, VP of WWC.

Climate change aside, investing in water makes good business sense: In 2015 alone, risks posed to the natural resource by climate change cost the private sector around $14 billion. What’s more, the cost of water insecurity has now reached $500 billion annually. And despite increasing governmental budgets for water management, the WWC estimates that an additional €100 billion will be required to create sufficient new water infrastructure. A further €155 billion will also be needed to improve current equipment in order to future-fit systems in the face of global warming.

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Echoing the World Water Council’s concerns — albeit with a slightly more optimistic perspective — a new CDP report analyzing water data from 742 major companies — including Colgate-Palmolive, Nestlé and Kellogg’s — has revealed that the private sector is slowly, but surely taking strides to improving water security.

For the Global Water Report, CDP tapped 4,653 companies to disclose their water activities and received a 46 percent response rate.

Businesses that disclosed to CDP collectively committed $23.4 billion to finance new water projects in 2017, which include desalination plants, various drought resistance interventions and irrigation systems. However, this figure is significantly lower than the $6.4 trillion deemed by the UN as being necessary to tackle water scarcity by 2030, particularly in light of the massive quantities of water withdrawn by disclosing companies each year. In 2017, this number equated to 5.6 billion mega-liters of water.

“The stakes are high as we assess corporate progress towards a water-secure world. From brand damage to disrupted supply chains, increased operating costs to constrained growth, water security is now big business and poses increasingly significant threats and opportunities to global firms,” said Paul Simpson, CEO of CDP.

But it’s not all bad news. According to the report’s findings, 7 percent of disclosing respondents (53 companies) have created an internal value cost for water — Colgate being one of them. The personal care company measures the “true” cost of water as 2.5 times its purchase cost, once environmental and social factors are taken into consideration.

CDP’s updated A-List further illustrates the progress business is making on water stewardship. The report marked an almost 200 percent increase in the number of companies engaging in water management activities. The Water A-List has now expanded to include 73 companies, 13 of which are based in the US.