Water Day: An increasing focus for asset managers

The world faces a 40% global water deficit by 2030 under a business-as-usual scenario, says UN

Water is becoming a key active ownership theme for asset managers, Morningstar has said as COP27 embarks upon Water Day (Monday 14 November).

As well as the Valuing Water Finance Initiative, which was backed by 64 investment managers representing $9.8trn when it launched in August this year, there is evidence asset managers are becoming more specific about the kind of reporting and behaviour they expect from companies on responsible water use and are using their voting rights and engagement to hammer home the message.

See also: – All ESG Clarity’s COP27 coverage

A UN study in 2020 found that global water usage has increased by a factor of six over the past 100 years and continues to grow steadily at a rate of about 1% per year. It also stated the world could face a 40% global water deficit by 2030 under a business-as-usual scenario, Morningstar’s director of sustainable stewardship research Lindsey Stewart highlighted in a note on water risks.

Coming back to the evidence of water as an evolving engagement theme, he pointed out among the 25 managers Morningstar has assigned with ESG Commitment Level ratings of Leader or Advanced—the highest two ratings— it found substantive comments on water-related sustainability expectations by eight managers: Alliance Bernstein, BNP Paribas, Boston Trust Walden, Calvert, LGIM, Robeco, Schroders, and UBS.

Lindsey Stewart, director of investment stewardship research, Morningstar

These managers’ policies cover focus on water as part of a holistic environmental approach, encouragement of better corporate reporting and clearer policies, and support for shareholder resolutions addressing water-related risks. They emphasise the financially material nature of water-related risks for many companies,” Stewart (pictured left) said.

He added: “Given the crucial importance of water to life and to business, we can expect that managers’ thinking on these issues will develop further post-COP27 and be reflected in managers’ policy updates for 2023.”