McKinsey, World Bank warn on water

Environmental Finance, 26 November 2009 - Governments and private institutions must invest $50 billion-$60 billion annually between now and 2030 to avoid future water shortages causing serious economic and environmental consequences, according to a report from McKinsey and the World Bank.

Charting our water future finds that, by 2030, projected population and economic growth will lead to global water demand 40% in excess of current supply if no or inadequate action is taken in the coming years. This would leave one-third of the world's population with access to only half the water it needs.

However, after studying the situation in China, India, South Africa and São Paulo state, Brazil – four regions that will collectively account for 40% of the world's population, 30% of global GDP and 42% of projected water demand in 2030 – the report claims that future demand for water can be met through cost-effective measures and existing technologies.

It says that if a balanced portfolio of demand- and supply-side measures is adopted in each country, the projected water requirements in 2030 can be met at an estimated cost of $19 billion per year for these countries, just under 0.06% of their combined forecast GDP for that year. Globally, the cost would amount to around $50 billion-$60 billion per year.

But the report warns that if only traditional supply-side measures are implemented, additional expenditure of up to $200 billion per year globally would be required to close the water gap.

It suggests investors should look favourably at these projects given that “many of the most cost-effective measures identified … can pay back their initial capital investment in three years or less”.

If this investment does not materialise, water will become a real business risk, indicates the report, which was backed by leading businesses including Coca-Cola, Nestlé, SAB Miller and Syngenta.

Michael Mack, CEO of Syngenta and Peter Brabeck-Letmathe, chairman of Nestlé, both questioned the idea of water as a “human right” during a press conference on Monday to launch the report. Brabeck-Letmathe said people had a right to water for their basic needs, but argued that “it's not a human right to wash your car, to fill up your swimming pool, to water your golf course”.

“Water needs to rise up the totem pole of political discourse,” said McKinsey's Giulio Boccaletti. “We need to stop flying blind in making decisions about water without a map on the table.”

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