Ceres launches company water risk benchmark

Ceres, the US-based environmental investment coalition, has launched a benchmarking system to enable investors to score a company’s water management strategies against industry peers and best practice. The environmental investment group said unprecedented water crises meant investors were increasingly looking to assess relevant risks in their portfolios. It said companies in the apparel, beverage, food, agriculture and electric power had all been hit, either by drought in Russia, China and across the southern tier of the United States, or by extreme floods such as in Australia, Pakistan and the Midwestern U.S. in the last year alone. As a result, clothing company, Gap, slashed its annual profit forecast by 22% in the wake of a drought that devastated Texas’ cotton crop, a major source of the company’s cotton. Kraft, Sara Lee and Nestlé have all announced food price rises to offset higher commodity costs prompted by factors including droughts and flooding. The Aqua Gauge, developed over nine months with input from 50 investors, companies and public interest groups, is an Excel-based tool with an associated methodology on which investors can contrast a company’s water management activities against definitions of leading practice across four main themes: measurement, governance and management, stakeholder engagement and disclosure. On measurement, the AquaGauge looks at water use in direct operations and supply chains. Governance looks at the involvement of the board and senior management in addressing water issues, as well as how water is factored into capital investments and strategic decisions. The transparency section examines whether water information is being disclosed in ways that are meaningful and useful to investors. A report released with the new tool says some companies are already demonstrating leading water practices. Nestlé, for example, employs customized water risk mapping, while Rio Tinto has been working to put a financial value on water used in its mining operations. More than 350 institutional investors collectively managing $43 trillion in assets backed this year’s Carbon Disclosure Project water survey sent to 408 of the world’s largest companies. US investors have also been filing shareholder resolutions asking for water-related disclosure from companies in a broad range of sectors, including food and beverage, oil and gas, and electric power. Prominent European institutional investors, including Norges Bank Investment Management, Robeco and Hermes Fund Managers, have begun to assess water-related risk in their portfolios and directly engage high-risk companies on how they are managing water issues.