Water – Cover story
tion plants in California, which is a water-stressed region of the US, or in Taiwan which does not suffer from such issues. “When information about the location of company operations is available, we can then map these assets to water basins to form an assessment of risk,” Chew says. Manulife then looks at the company’s water efficiency rate, a task made easier if it has disclosed the average number of water gallons used to generate a unit of production. What is the trend in their water use? Is it becoming more efficient? Can it demonstrate a strategic approach to water, such as establishing a board-level sustainability committee that sets water targets? Are those targets linked to management incentives? Do they have evidence of a strategic approach to make the business water resilient, such as recycling or using greywater (from baths, sinks and washing machines)? But the firm believes that to understand truly how much water a business uses and where it is sourcing it from, you need to also look at its supply chain.
Engagement is, of course, a big part of sustainable investing. For example, having invested in a food and beverage company in China, which is dependent on a particular water basin, Man- ulife requested greater clarity on how the company manages water risk. Following the discussions, the company has regularly dis- closed such data, and has shown a 10% fall in water consump- tion. “We raise this issue with companies because a water shortage would affect their ability to make products, either directly or through procuring inputs from their supply chain,” Chew says. Manulife also engaged with a US electric utility that was dis- persing the coal ash from its energy generation process into wastewater ponds. As the climate effect is making rain and flooding more frequent, there was a risk that these ponds could
overflow and contaminate the local water supply. The company has since signed an agreement to improve how it manages its wastewater pond. Water is not just an issue for equities. It is a part of real assets too. In Manulife’s real estate projects, for example, it has a degree of control over water efficiency measures and is being innovative in how it sources and uses water. Manulife has also been harvesting the rain. In a pilot project in Montreal it has used rainwater to grow vegetables. “Water is a big part of how buildings operate,” says Maria Clara Rendon, ESG director of private markets at Manulife Investment Management.
“One of the reasons why water is different to other resources is that it is sensitive for communities,” she adds. Rendon says that this is an important aspect that a business needs to get right. “If water is not managed properly it may put a company’s licence to operate at risk.”
A big element of this is serving the communities in which companies operate to ensure that they are not drawing too much from dwindling resources. In California, a Manulife pro- ject is managing a river co-operatively to irrigate farmers’ crops and recharge groundwater. “It is about communities sharing resources,” Rendon says.
Thirsty industries So it is not just people who need water; it is vital for companies too. Before we start naming and shaming the industries that use more than others, an important distinction has to be made. “There is a difference between water withdrawal and water consumption,” Hengerer says, before explaining that utilities are the largest withdrawers of water to cool their power plants, which is discharged back into rivers and oceans once it has been used.
The physical risk of climate change has a strong link to water issues. Roland Hengerer, RobecoSAM
This is another example of water and climate issues being so closely intertwined. “We have had cases in Europe where the summers were so hot that some nuclear power stations reduced their output because the cooling water would have increased the already high water temperature above acceptable thresh- olds,” Hengerer says. Consumption is the area where improvements can be made. Miners, the chemical industry, paper producers, food and bev- erage companies and semi-conductor makers are huge con- sumers of H2O, but agriculture, Hengerer claims, is by far the biggest consumer of water, stating that it uses 70% of the world’s freshwater, according to the UN Food & Agriculture Organisation. “This is not coming from companies, but often from small farmers so it is difficult to handle,” he adds. Geall goes a step further, believing that it is not just the amount that industry uses that is the problem. “It is also shamefully
Issue 90 | February 2020 | portfolio institutional | 27
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46
