ESG Club feature – Water
good ecological condition. The situation is so bad that there are fears Thames Water, which supplies a quarter of Britian’s pop- ulation, is on the verge of collapse.
The sewage scandal has put water issues on the front pages, which not only raises awareness, but could force companies to act. “You can have a conversation with a person on the street and people understand it,” says Alexander Burr, ESG policy lead at Legal & General Investment Management (LGIM). “It is unfortunate that it has had to go this far. However, with the increased attention from stakeholders across society, we believe action must be taken.”
It is not just the inconvenience of swimming through raw sew- age that is the issue. Water may cover 70% of our planet but only 3% of it is drinkable. Supply is finite and with the popula- tion growing, so will the demand for water to drink, bathe in and to grow more food. Pollution, therefore, means poorer water quality, shortages and less nutrition.
Ocean drive Yet this does not mean the pollution in our oceans is not as big an issue because we don’t drink it. The situation here could be worse as it threatens our existence in other ways. The oceans cover around 70% of our planet and we would struggle to survive without them. Not only do they generate half of the oxygen we breathe, but they also clean our air, feed us and provide millions of people with a livelihood. The oceans influence our weather by storing solar radiation and distributing heat and moisture around the world. They are also a carbon sink, drawing the harmful gas out of our atmosphere, making it a natural ally in the fight against climate change. This shows that land management, water and climate change are interconnected, Burr says.
Indeed, burning fossil fuels does not only impact our atmos- phere, but our oceans too. The seas absorb around a quarter of man-made carbon emissions, which makes it more acidic. This alters the chemicals in the water, which many plants and ani- mals rely on. For example, mussels, clams and coral need calci- um carbonate for their growth, the level of which falls as water becomes more acidic. Rising acidity also makes it harder for some fish to sense danger or hunt prey and bleaches coral reefs. “Water is one of those issues where the risks are extremely diverse, cutting right across areas such as climate change, nature, health and human rights,” Burr says.
Plastic not so fantastic
Then there is plastic. It is not biodegradable and is, therefore, here to stay. Plastic entangles marine life and is eaten by fish and seabirds after entering the sea directly, through sewers or is washed off roads and into rivers and lakes during storms. Indeed, 8 million pieces of plastic make their way into the
32 | portfolio institutional | July-August 2023 | Issue 125
ocean every day, killing 100,000 marine mammals and turtles and 1 million sea birds each year, according to British govern- ment figures from 2018. One in every three fish eaten by a human contains plastic, says Surfers Against Sewage. Indeed, plastics, albeit microparticles, have been found in people’s stomachs.
Another issue is that pollution in our rivers and seas is creating drug-resistant germs. Along with the food chain and drinking water, rivers and seas could be a breeding ground for anti-microbial resistance.
This could increase instance of people becoming seriously ill and even dying from a cut on the finger or a graze on the knee as drugs fail to kill any bacterial infection they cause. You also need antibiotics for operations and to help mothers give birth.
301 billion reasons to keep it clean “Water quality and quantity is not currently as central in invest- ment and corporate decision-making as it should be. This needs to change,” Burr says.
In 2021, CDP estimated that $301bn (£237.5bn) of value is at risk if corporates do not improve and innovative around their use of water.
Whilst water has implications for corporates, there are also macro-economic impacts to consider. For example, the World Bank has highlighted that in some regions, water insecurity could cut economic growth by as much as 6%. “Lack of action may be due to water risks occurring further down supply chains, across markets, making it an indirect and harder to evaluate issue. The value and impact of water is often not reflected in its price, so the negative externalities created in the water system go unallocated and unaccounted for,” Burr says. He adds that for water to be considered when pension schemes and insurers make investment decisions, it must be pointed
Water quality and quantity is not currently as central in investment and
corporate decision-making
as it should be. Alexander Burr, Legal & General Investment Management
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