CDP water initiative exposes disclosure challenges

Environmental Finance, 26 November 2009 - Investors have welcomed the launch of a water disclosure programme by the Carbon Disclosure Project (CDP), but the initiative exposes a plethora of challenges in understanding the risks and opportunities associated with water scarcity.

The CDP hopes to replicate with water its success in encouraging companies to disclose investment-relevant information about climate change. Next year, it is to send 300 of the world's largest "water-intensive" companies a questionnaire about the risks and opportunities they face in relation to water.

Meanwhile, consultancy Irbaris has written a report, The Case for Water Disclosure, to help provide businesses with a system for reporting their use of water and to assess their exposure to changing patterns of water availability.

It claims the impacts of changing patterns of water availability are not recognised nor well understood by most businesses even though they are set to worsen as demand for water increases and its supply is threatened by climate change.

“Investors need to be concerned about water because it is already impacting companies' operations and costs and it will continue to do so,” states the report. “Some investors already understand this, but they lack reliable comparable information on which to base their assessments.”

While the report says the disclosure project will help fill this knowledge gap, it admits the issue is complicated and insists the “measurement and reporting of water availability and usage is much more complex than for carbon”.

“Whereas it does not matter whether a tonne of carbon dioxide [CO2] is emitted in Sydney or Stockholm (in terms of its environmental impact), the impact of extracting a cubic metre of water varies enormously with geography.”

Second, “the source and use of the water also make a big difference – the impact of using water that has fallen recently as rain is often different from that of withdrawing water that has been stored in an aquifer for millennia,” says the report.

“While standards to capture these complexities are being developed, there is no consensus yet on what exactly the standards should be, never mind consistent or widespread adoption of such standards,” it adds.

Irbaris' William Lynn, one of the authors of the report, said ultimately “different types of disclosure may emerge for different regions and industries”.

The initiative is being supported by financial institutions including Norges Bank Investment Management, Schroders, APG Asset Management and Dexia Asset Management, but Lynn insisted that smaller companies and investors are needed to engage in the debate and realise the seriousness of the issue.

“Companies can pay to emit an extra tonne of CO2, but there is no substitute for water,” he said.

Author Environmental Finance Publication Date 26 Nov 2009 Document Type News articles Issue/Topic Business Role/CSR Ecosystems Water Source Environmental Finance Include In RSS Business & Sustainable Development News Corporate Social Responsibility News