CDP calls on investors to help companies on water stewardship

Investor-backed environmental data group releases 2013 Water Report

CDP, the former Carbon Disclosure Project which collects corporate environmental data on behalf of institutional investors, is calling on them to take a leading role in guiding companies on the emerging issue of water stewardship.

The CDP argues that companies are taking a “misguided” and “outdated” approach to water-related risk management.

Companies’ focus on simply reducing water use is an “inadequate response” to more substantive water risks, which threaten shareholder value, the CDP says in its new 2013 Water Report.

Instead, the notion of ‘water stewardship’ is being developed by the CDP and others as a way to achieve water security. The CDP is “calling on investors to take a leading role in guiding companies on this issue”.

CDP Chief Executive Paul Simpson said there’s a “significant disparity” between investor expectations and company actions on water. Although the number of investors requesting corporate water data through CDP has quadrupled in just three years (to 530, representing $57trn), the number of companies taking action and disclosing has not kept pace.Simpson said: “A shift in practice is required if companies are to realize the true benefits of water stewardship, achieve business resilience and competitive advantage. Using the insights from standardized company disclosures, investors can enhance risk management of this critical issue.”

Piet Klop, Senior Advisor, Responsible Investment, at Dutch pension asset manager PGGM Investments said the problem is that the business value of water risk remains unclear “because company information on water is rarely comparable and meaningful”.

The CDP admits there is still much to be done to catalyze greater corporate water stewardship. So next year it will send out a revised water questionnaire and trial what it terms the world’s first public water scoring methodology. This will be tested on a confidential basis with Global 500 respondents only, ahead of full implementation for all respondents in 2015.

Earlier this month Norges Bank Investment Management (NBIM), the arm of the Norwegian central bank which manages the NOK4.6trn (€567bn) Government Pension Fund, in a letter to the CDP, called for much greater detail in companies’ reporting of their water risks.