Valuing Water Finance Initiative releases inaugural benchmark

Assessment shows significant work to do in key areas, firms struggle to make the case internally for allocating resources to water interventions.

Companies targeted by the Valuing Water Finance Initiative have significant work to do to meet investor expectations regarding water quality, public policy engagement, and access to water and sanitation, according to the initiative’s inaugural benchmark analysis.

Launched last year, the initiative aims to engage 72 of the world’s biggest corporate water users and polluters – including Unilever, Nestlé, JBS, Apple and Amazon – to drive action on water-related financial risks.

It also plans to raise awareness within the capital markets of the widespread negative impacts of corporate practices on water supplies. 

Signatories to the initiative, which is coordinated by Ceres, include CalPERS, CalSTRS, the New York City Office of the Comptroller, Federated Hermes, Franklin Templeton and Aviva Investors.

Details of which companies each investor is engaging have not been released. A spokesperson for the Valuing Water Finance Initiative said disclosure was “strictly confidential and solely at the discretion of the investor”.

The benchmark, launched on Wednesday, uses publicly available disclosures to evaluate companies’ alignment with six corporate expectations: water quantity, water quality, ecosystem protection, access to water and sanitation, board oversight and public policy engagement.

Centred on these expectations, the benchmark is comprised of 12 core indicators, which have associated sub-indicators. The methodology also includes 12 additional “advanced” sub-indicators to highlight areas of leading practice where a company is undertaking higher-ambition steps to amplify its impact.

The six corporate expectations are weighted equally, with 15 total points available for each and 90 points in total. The overall percentage score the company receives is placed within one of four categories along the “ambition spectrum”.

Benchmark results

At present, no company has been categorised as “leading the way”. Eleven are “on track” category, 19 are “on the way”, and more than half – 42 – are in the “starting the journey” category.

The lowest scoring firms were Chiquita Brands International, Monster Beverage Corporation, The Hain Celestial Group, Inc, Inner Mongolia Yili Industrial Group and Perdue Farms.

Speaking to Responsible Investor, Kirsten James, senior programme director of water at Ceres, said she was surprised at how poorly companies scored on the water quality expectation overall.

So far, only 17 percent have set time-bound water quality targets and just 6 percent have introduced time-bound contextual water-quality targets in direct operations and/or supply chains.

“I know the issue often isn’t included on the top of the priority list, but I was surprised to see how far behind many are,” said James. “Likely some companies have been focusing more on other issues such as water availability, an area where companies generally scored much higher. So I definitely think that’s an area where the initiative going forward can really encourage companies to place focus.”

James also noted that the ecosystem score was very low overall. Only 13 percent of firms have time-bound targets to protect or restore ecosystems with specific consideration of freshwater supplies and aquatic biodiversity.

“But hopefully given the heightened attention to the private sector’s nature and biodiversity impacts and dependencies this will get some much-needed attention in the coming years,” she said.

James noted that she has heard repeatedly from companies that the number of competing sustainability-related issues means “making the case internally for resources targeted towards water interventions can be difficult”.

It is therefore important for the Valuing Water Finance Initiative to stress the dual impact of interventions, as well as showcasing firms that are developing responses that hit multiple issues at the same time, she added.

“For example, attention to freshwater ecosystems, among the most threatened in the world, benefit nature and biodiversity. Access to water is also a human rights issue, so companies that address their impacts to water resources are also helping ensure communities’ access to clean water and sanitation.”

On a more positive note, James highlighted that the assessment has shown bright spots and innovative thinking among some firms.

For example, she pointed to collective action projects that some companies are undertaking, in which they come together in priority watersheds and work with governments, communities and tribes to achieve shared water goals. “We just need more of this.”

Moving forward, James said investors are keen to engage more companies and work out how best to integrate and bring related topics such as climate and biodiversity into engagements. “Bringing more investors under the tent of the Valuing Water Finance Initiative would help extend the initiative’s reach to more companies.”

She also expects water-related shareholder resolutions to become an increasing feature at AGMs.