Background/Objectives
The problems:
- Underrepresentation in ESG Frameworks: Despite the fundamental role of water in the global economy, it has been less emphasized compared to other environmental concerns such as carbon emissions in ESG frameworks. This oversight impacts the effectiveness of corporate sustainability reporting and risk assessment.
- Climate Change and Water Scarcity: The increasing instances of droughts, floods, and other water-related climate events underscore the need for better water management strategies to ensure climate resilience.
- Corporate and Financial Risks: The lack of comprehensive water risk assessment and disclosure in financial portfolios exposes corporations and investors to significant financial risks, which are often not accounted for in current practices.
The objectives of the work include:
- Developing robust metrics and methodologies for assessing and disclosing water risks in ESG frameworks.
- Enhancing the understanding of water-related risks in financial portfolios and corporate disclosures.
- Contributing to the global efforts in achieving Sustainable Development Goals (SDGs), specifically those related to water management and climate resilience.
The paper synthesizes information and data from various global initiatives and studies. This includes data from the ESG, Water, and Emerging Risks Network (EWER) initiative by the Columbia Water Center and the sustainability reporting platform CDP. These sources provide a broad context of the current state of water risk assessment and management in the corporate and financial world, relevant to various climates and environmental conditions. The paper aims to provide information to establish a global context for the importance of water in ESG regulation and climate resilience, focusing on the global nature of the water crisis.
Approach/Activities
The paper examines existing ESG frameworks and water risk assessment methodologies, focusing on integrating water-related risks and sustainability efforts into corporate and financial portfolios. It leverages data analytics for risk assessment, explores the alignment of water management with sustainable development goals, and evaluates the impact of technologies like IoT and AI on water risk management. This theoretical and analytical work synthesizes a range of global studies and expert analyses rather than conducting field or laboratory experiments. The aim is to provide insights into the current state and suggest improvements in water management within ESG regulations and climate resilience strategies.
Results/Lessons Learned
- Current State of Water Risk in ESG: Analysis shows a notable underrepresentation of water risks in existing ESG frameworks. This is evident from limited water disclosures compared to other environmental aspects, such as carbon emissions.
- Inadequate Metrics and Reporting: Initial findings suggest that current metrics and reporting standards for water risk in ESG frameworks are insufficient. They often do not fully capture water use, scarcity, and management complexities.
- Sector-Specific Insights: The study has identified key industries where water risk is particularly pronounced, such as agriculture, pharmaceuticals, and apparel, which lack the required representation.