A new initiative of the Carbon Disclosure Project (CDP) aims to help institutional investors better understand the business risks and
opportunities associated with water scarcity and other water-related
issues.
CDP, an independent not-for-profit organization, has gathered primary
corporate climate change information from thousands of businesses
around the world so that it can be incorporated into business and
policy decision making. With the launch of CDP Water Disclosure it is
using the same established system in order to tackle the increasingly
vital issue of water scarcity.
In conjunction with the launch of the program, CDP has released a new report entitled ‘The case for water disclosure’, written by Irbaris, another supporter of the initiative. It details the rationale for the new program and findings from data collected in a small pilot in 2008.
Paul Dickinson, CEO of CDP said: “Much of the impact of climate change will be felt through changing patterns of water availability, with shrinking glaciers and changing patterns of precipitation increasing the likelihood of drought and flood. If climate change is the shark, then water is its teeth and it is an issue on which businesses need far greater levels of awareness and understanding. CDP Water Disclosure will raise this awareness and drive companies to take action to mitigate risks and seize opportunities.”
CDP Water Disclosure will provide a system for businesses to report their use of water and their exposure to changing patterns of water availability. Companies face risks such as lack of water impacting agricultural and manufacturing processes and the threat of regulation increasing prices and limiting the volume of water available to them. The program is also a tool for investors and businesses to be able to evaluate companies’ ability to operate successfully in a water-constrained world.
The United Nations (UN) forecasts that by 2030 almost half of the world population will live in areas facing water stress or water scarcity. Less than 1% of the world’s water is easily accessible fresh water and the effects of climate change, increasing population, urbanization, per capita demand, and pollution damage to supplies will put even greater pressure on these limited resources.
Financial institutions including Norges Bank Investment Management (NBIM), Schroders, APG Asset Management
and Dexia Asset Management have given their support to CDP Water
Disclosure, stating that water already impacts companies’ operations
and will become an increasingly important investment issue.
In 2010 CDP Water Disclosure will send a questionnaire on behalf of institutional investors to approximately 300 of the world’s largest corporations in water intensive sectors including chemicals, Fast Moving Consumer Goods (FMCG’s), food and beverage, mining, paper and forest products, pharmaceuticals, power generation and semiconductor manufacturing. The questionnaire will ask companies to measure and disclose information on water usage, the risks and opportunities in their own operations and their supply chains as well as water management and improvement plans. The questionnaire results will be made available to endorsing investors and summarized in an annual report, the first of which will be produced in the last quarter of 2010.
Marc Fox, Vice President of GS SUSTAIN Research at Goldman, Sachs & Co, comments: “CDP Water Disclosure is an important new initiative as water issues are increasingly impacting companies’ ability to uphold competitive advantage in many global industries. GS SUSTAIN Research currently incorporates water efficiency within its methodology and views increased disclosure of performance to be a critical step in assessing the effectiveness of companies’ responses to the water challenges they face."
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