WEF has been warning about water crises for a decade. Why is no one listening?
By Ariane Laporte-Bisquit, WWF Water Risk Filter Lead & Alexis Morgan, WWF Water Stewardship Lead
It has become the annual refrain each January: water crises being ranked as one of the world’s top global risks by the World Economic Forum (WEF) Global Risks Report. And this year is no different. For ten consecutive years, water crises have remained rooted in the top five most pressing issues of our time in terms of impact, and yet still we see little movement by companies or investors to scale up their responses to the challenges, which are only being compounded by climate instability.
Water is core to running nearly all businesses. Every year we hear that billions are lost due to water risks. Every year the business and financial worlds are warned about the risks posed by worsening water crises. But risks are not being transformed into responses. So, what can be done?
Perhaps we need a new narrative. Perhaps, it is time to stop focussing on risks and start talking about the global water opportunities facing business leaders and investors.
Identifying opportunities: contextual responses to water risks as a means to grow income
Responding to risk requires not only an understanding of where one’s value chain uses water, but also geographically where one’s company is exposed. The WWF Water Risk Filter, a trusted, practical, online tool used by numerous leading Global 500 corporations (e.g. H&M, EDEKA, Carlsberg), has supported businesses and investors for many years to make better investment decisions on risk mitigation. However, we are collectively failing, repeatedly, to see the upside of risk.
Responding to water risk offers huge opportunities for those who can see the potential. Indeed, the Water Risk Filter’s unique Respond section dynamically links the water risk assessment results for any given site (or a portfolio of sites) to provide a customised set of water stewardship response actions. Whether users want custom recommendations for 1 site, 1000 sites, all sites located in a specific country, or their entire portfolio, the Respond section can generate a tailored set of response actions — from a library of over 150 possible actions — at just the click of a button.
While the opportunities of such an approach may be evident for companies specializing in water efficiency and pollution technologies, companies in all sectors should not dismiss the potential of a water opportunity lens for sales. Fast moving consumer goods companies can think about where to market water-saving products; food and beverage companies can think about where to position responsible, low water product offerings; and retailers can begin to think about how to support water resilience through product offerings (e.g., an Ikea flood resilience kit anyone?).
Evaluating financial value affected by water risks
If indeed we are to go beyond stating that water is a huge risk, we need to appeal to both corporate financial officers and to investors. Water is challenging in this regard as the price of water remains cheap, yet the financial impacts of droughts, floods, tighter water regulations or social conflicts over water resources can be significant for businesses. So too, however, can profits. Water risks create new markets and the need for new offerings — something that savvy investors should reward. Conversely, investors and companies that do not account for the financial value of water risks are likely to make ill-informed investment decisions — affecting long-term business growth, communities, and the environment.
To helps users navigate through the array of existing tools and approaches for valuation that have emerged over the past 15 years, the WWF Water Risk Filter contains a new Valuing Water Database. With over 100+ tools and approaches, this database can help users identify the best tool for the job. The database also highlights some gaps in the existing tools to support valuing water. Accordingly, WWF is developing, in collaboration with Water Foundry, its own valuation tool: Water And ValuE (WAVE) Tool. Powered by CDP Water Security database, this new valuation tool will enable users to more rigorously analyze how water risks can affect the financial value, thus informing better investment decisions needed to tackle the rising tide of water challenges.
WWF is currently beta testing the new WAVE Tool with corporate partners and for more information, check out our latest WWF report.
Preparing for future water challenges under climate change
Returning to the 2020 WEF Global Risks report, as we’ve argued before, water is not simply the “water crisis”. Rather, water is climate. From ‘Extreme Weather Events’ to ‘Climate Change Failures’ and ‘Natural Disasters’, the majority of the top five global risks listed in WEF’s report are interlinked to climate change and water. If we are to mobilize to meet the challenge we’re facing, we need equip companies and investors to harness the opportunities that arise with an unstable climate future.
With this in mind, the WWF Water Risk Filter team is currently developing climate and socio-economic pathway-based scenarios — a new functionality to be launched in 2020. These Water Risk Filter scenarios, in line with the Task Force on Climate-related Financial Disclosure recommendations on scenario analysis, will help users to anticipate future water risks exposure and make better investment decisions for climate resilience. Put differently, it will let companies and investors evaluate emerging opportunities and better understand which companies are responding to, and positioning for, these future water scenarios.
Turning on the taps: scaling investments for climate and water resilience
We need to work to change the narrative so that we are writing a different story when World Economic Forum writes their 2021 report. If we are to write a new narrative of water resilient economies, we must begin to mobilize water investments at pace. Now.
WWF believes in walking the talk and that is why we are doing just that: harnessing the Water Risk Filter to identify water opportunities for our Bankable Water Solutions. From Zambia to the Mekong, we are exploring how we can leverage water risk data to better link need, solution, actors and funds. We are working with partners in the Dutch Fund for Climate and Development (DFCD) to mobilize hundreds of millions of Euros. We are working to mobilize funds through Mobilising More 4 Climate (MoMo4C).
We are changing the story from risk to opportunity, and in so doing, driving towards a future in which humans live in harmony with nature.
