When first-of-its-kind tool ranked over 200 industrial activities according to their potential impact on water quality and quantity, it was found that apparel, financial services and fossil fuels have the greatest impact. Investors and lenders can use this tool to assess the potential impact of their portfolios on water resources and water security.
Water Watch: CDP’s Water Impact Index developed by environmental disclosure platform CDP reveals the world’s most polluting and water-intensive industries.
The latest report from the IPCC highlights the impacts of a changing climate on water resources globally. Extreme weather events such as drought, with its accompanying wildfires, and flooding will increase in severity as climate breakdown takes hold – indeed, with every 1 degree of warming extreme rainfall intensifies by 7%. Managing our global water resources, ecosystems, institutions and infrastructure is vital to enabling us all to thrive in a changing climate.
Launched last week, Water Watch: CDP’s Water Impact Index measures the potential impact on water quality and quantity of over 200 industrial activities. The tool can be used by investors and financial institutions to assess the potential impact of their portfolios on water resources and water security. It can also be used by companies to assess the potential water impact of different parts of their business and value chains.
Grounded in independent and trusted academic, scientific and industry-recognized sources, the tool assesses the water impact of each industrial activity at different stages of the value chain. The apparel and textile manufacturing sector, cotton farming, livestock farming, oil and gas extraction and mining are amongst the sectors found to have the largest potential impact on water resources.
Finance too, emerges as a sector having a critical impact on the world’s rivers, lakes, aquifers and streams. The flow of money from banks, insurers and asset managers into high impact companies is enabling agribusinesses to pump ever increasing amounts of non-renewable groundwater, it is enabling tailings dams to be constructed at the heads of free-flowing rivers and it is enabling chemical, apparel and pharmaceutical companies to release toxic pollution, much of which is carcinogenic, posing a real and present danger to human health.
“Achieving a water secure, net zero future will require a complete transformation of our global economy and urgent action is needed. To succeed, companies responsible for the greatest impacts on water resources must transform their business models, products and practices in ways that decouple production and consumption from the depletion of water resources. Financial institutions have a critical role to play in facilitating the transition to a water-secure economy. Water Watch: CDP’s Water Impact Index shows that the level of water impact in investment portfolios is significant, with banks, investors and insurers being exposed to critical levels of water impacts, and hence risk, through their shareholdings and loans. Equipped with the right information and robust data, investors can drive progress toward a water secure future.”Cate Lamb, Global Director of Water Security at CDP
This is the first tool of its kind that allows financial institutions to understand the relative impact of different industrial activities on the world’s water resources. In doing so, the tool fills a critical data gap in the efforts of financial institutions to understand and address their exposure to water risk.