Cover story – Water
lagging in its usage practises; not only is it using a lot, it is also wasting a hell of a lot too,” he says. He labels irrigation techniques used in farming as being inad- equate for today’s standards. “Irrigation methods are resulting in poor crop yields, and huge amounts of water being wasted. “Rather than targeting where the water goes and delivering the right amount, what we are seeing is an outdated flood-irriga- tion technique being used,” Geall adds.
The textile industry is another sizeable consumer of water, due to water use in the production of cotton. Manulife looks closely at textile companies, to find out where they source their cotton. “Cotton is a thirsty crop,” Chew says. “We look at water consumption from a risk perspective, but we also see that scarcity can create opportunity for companies to increase supply, make industrial processes more efficient, or improve water quality,” Chew says. More understanding of what it takes to get a shirt onto a high street store’s shelves could motivate companies to think about how they are using raw materials.
“There is not enough understanding on the part of the con- sumer as to where their products are coming from, especially in the fast fashion sector,” Geall says.
Data drought Around 2.5 billion people do not have access to clean drinking water and more than 4 billion of the globe’s 7.5 billion citizens are without safe sanitation. “That strikes me as an incredible thing to remedy, but we are not having the discussion on the importance of remedying these issues in the way that we are with plastic, for example,” Geall says. “Water has not quite achieved the same level of prominence among investors as the more familiar sustainable topics, such as reducing C2O emissions, but it is starting to enter the dis- course a little bit more. “Investors understanding the importance of water and the impact that it has on our everyday lives is based on data, but in this case, the data is not quite as developed as other areas of the sustainability debate,” he adds. Robert-Alexandre Poujade, an ESG analyst at BNP Paribas Asset Management, says that clients have less focus on water conservation because “the entry door of ESG” has been climate change. “The big push around ESG has started on the environmental side, especially climate,” he adds. “Water is lagging a little, but it is obvious that it is next in terms of awareness from our cli- ents and from the financial community.”
Another reason for this could be the lack of credible and recur- ring information, which is needed to hook in consumers and therefore company boardrooms.
“One of the key drivers of consumer adoption of plant-based 28 | portfolio institutional February 2020 | issue 90
Mis-management of water can have an impact on a company’s balance sheet and the profit and loss as well as its reputation. Edward Geall, Newton Investment Management
diets has been the environmental impact,” Geall says. “As well as the carbon footprint there is the water footprint. The amount of water needed to produce beef relative to a plant-based substi- tute is significantly greater. Consumers are starting to pay attention to that, but they are only able to do that if they have the information at hand.” This is what Poujade is working to achieve. “Our role is to push for transparency on water risk that companies are facing because there are gaps in corporate disclosure. “The dream for us is to have more visibility on how much water companies are taking and how much wastewater they are producing.” Newton has a dedicated responsible investment team assess- ing the sustainability of water on a sectorial and at the individ- ual security level. “We have to be honest, if the industry looks at water data and how we can use it to gauge impact verses something like carbon, the underlying data is not as advanced as we would like it to be,” Geall says.
This is strange as it is intertwined with one of the world’s big- gest environmental issues. “Climate change is often all about water,” says Hengerer. “The physical risk of climate change has a strong link to water issues. “Many of the negative issues that come from rising global tem- peratures are connected to water and changes in the hydrolog- ical cycle, for example, either more droughts, and from that you have forest fires, or too much water with flooding and too much rainfall.” It appears that there are those who understand that there is a link between the two. “Some investors think about the issue as a climate-water nexus,” Chew says. “As the climate changes, the way the environment interacts with water changes radically
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