A recently-released report by the investor coalition Ceres, the financial services firm UBS and financial data provider Bloomberg evaluated and ranked the water disclosure practices of 100 publicly traded companies in eight key sectors. The report revealed that many companies are not including water risks and performance data in their financial filings. Only one of the 100 companies provided comprehensive water data on their supply chains.
The report used a scale of 0 to 100, and looked at data through June 30, 2009. The eight sectors looked at include beverage, chemicals, electric power, food, homebuilding, mining, oil and gas and semiconductors. The companies were scored in five categories: water accounting, risk assessment, direct operations, supply chain and stakeholder engagement.
Eighty of the companies scored less than 30 points. The mining sector received the highest scored overall, followed by the beverage industry. The homebuilding sector had the lowest overall scores. Only 21 companies disclosed targets to reduce water, and only 15 companies had goals to reduce wastewater discharge. Only 17 companies reported local-level water data.
The three highest scoring companies were UK beverage company Diageo, Swiss mining company Xstrata and U.S. electric power company Pinnacle West with 43, 42 and 38 points respectively.
The report recommends that investors do three things in regards to water practices:
- Engage the companies they own in water-intensive sectors about how they are assessing and disclosing water risks and related performance information
- Ask their asset managers to assess and engage companies on water and other ESG risks and opportunities–and make this a stipulation in Requests for Proposals (RFPs) and annual performance reviews
- Support investor initiatives, such as the Carbon Disclosure Project, the United Nations’ Principles for Responsible Investment’s work with the CEO Water Mandate, to achieve increased water disclosure
“Most companies provide basic disclosure on overall water use and water scarcity concerns, but their focus and attention so far is not nearly at the level needed given the enormity of this growing global challenge,” said Mindy S. Lubber, president of Ceres. “Our global economy runs on water and in many parts of the world this finite resource is under threat. Companies must do more to disclose their potential exposure from this issue and their strategies for responding.”
“Water is integral to the global economy. Whether you’re in California or China, clean potable water is an absolute must for sustaining communities and sustaining economic growth,” said Jack Ehnes, chief executive officer of the California State Teachers Retirement System (CalSTRS). “This report makes clear that companies are not providing investors with the kind of information they need to understand the risks and opportunities posed by water scarcity.”
“We chose sectors where water security concerns are likely to have a material impact on business, whether through regulatory, legal or reputational constraints that in some cases can go so far as to threaten a firm’s very ‘license to operate,’” said Julie Hudson, global head of SRI and Sustainability Research at UBS Investment Bank. “It is clear that any threat to water security could have a significant impact on the bottom-line of such companies.”