Water Watch: CDP’s Water Impact Index, developed by environmental disclosure platform CDP, reveals the world’s most polluting and water-intensive industries.
“Achieving a water secure, net zero future will require a complete transformation of our global economy and urgent action is needed,” said Cate Lamb, global director of water security at CDP. “To succeed, companies responsible for the greatest impacts on water resources must transform their business models, products, and practices in ways that decouple production and consumption from the depletion of water resources.”
The newly launched Water Watch: CDP’s Water Impact Index measures the potential impact that over 200 industrial activities have on water quality and quantity. The tool can be used by investors and financial institutions to assess the potential impact of their portfolios on water resources and water security. It can also be used by companies to assess the potential water impact of different parts of their business and value chains.
Grounded in independent and trusted academic, scientific and industry-recognized sources, the tool assesses the water impact of each industrial activity at different stages of the value chain. The apparel and textile manufacturing sector, cotton farming, livestock farming, oil and gas extraction, and mining are amongst the sectors found to have the largest potential impact on water resources.
Finance too, emerges as a sector having a critical impact on the world’s rivers, lakes, aquifers, and streams. The flow of money from banks, insurers, and asset managers into high impact companies is enabling agribusinesses to pump ever increasing amounts of non-renewable groundwater and enabling tailings dams to be constructed at the heads of free-flowing rivers. It is also enabling chemical, apparel, and pharmaceutical companies to release toxic pollution, much of which is carcinogenic, posing a real and present danger to human health.
“Financial institutions have a critical role to play in facilitating the transition to a water-secure economy,” said Lamb. “Water Watch: CDP’s Water Impact Index shows that the level of water impact in investment portfolios is significant, with banks, investors, and insurers being exposed to critical levels of water impacts, and hence risk, through their shareholdings and loans. Equipped with the right information and robust data, investors can drive progress toward a water secure future.”
Through its tool, CDP hopes to provide the capital markets with the information needed to take action on water security. This is an area where progress has lagged behind other environmental issues, such as climate change, both in terms of how well the risks are understood and how well integrated they are into investment decisions. CDP is also working on a tool that couples this impact data with CDP’s corporate action data.
“We are excited to use CDP’s Water Watch to identify the potential impact of our portfolio on water security,” said Adam Black, head of ESG and Sustainability at Coller Capital. “ESG monitoring and engagement are core elements of our programme and we constantly seek new methods, data and tools to enhance our approach.”
“However, as a secondaries investor with indirect exposure to thousands of underlying companies, we recognise the inherent challenges to effective monitoring and engagement,” added Black. “In that regard, we view the Water Watch as a valuable tool to efficiently screen our portfolio for water impact and identify particular company exposures where we may look to engage further on these risks. We look forward to using the tool to inform our work and to continue collaborating with the Water team more broadly as a member of CDP.”