Water risk gathers steam with moves from DWS, WWF and Thomas Schumann Capital

New initiatives underscore growing concerns over water risk

Investor action on water risk has been gaining momentum with a number of announcements over the past week.

DWS, the €759bn asset management wing of Deutsche Bank, has revealed it will launch investment funds “linked to water” as part of its efforts to push the topic up the agenda. 

It partnered with WWF to release a report on Wednesday highlighting “why we can no longer afford to neglect water risk”. 

The pair emphasised global unpreparedness to deal with the impact of water shortages, noting that water risk has appeared in the top five risks in the World Economic Forum’s Global Risks Report every year since 2012, but has “seen much less action than the climate crisis”. 

They also noted the potentially catastrophic impacts of water shortages. By 2050, it is estimated that 52% of the world’s population and 40% of global grain production will be in areas facing high water stress.

“WWF and DWS both agree that water risk affects all of society and all types of investments, and hence a holistic approach is best,” they said. 

In November, DWS called on “governments to legislate, accountants to measure and investors to invest” to tackle water risk, and has since urged the International Financial Reporting Standards board to improve disclosure requirements on the topic in its recent consultation. 

The asset manager said it now incorporated water risk into its investment process using an in-house “ESG Engine” based on data from multiple providers. It added that it was working with other players  “to help define a transformational framework for water investments”.  

The news comes as RI reported on Tuesday that BlackRock and Microsoft had provided grant funding for the creation of datasets on water stress in emerging markets, in partnership with the World Resources Institute. The grants will be awarded in the spring.

US-based Thomas Schumann Capital, which claims to sponsor “the world’s first benchmark water risk index family”, announced yesterday it had appointed Moorgate Benchmarks to administer its water risk indices.

Last year, US-based sustainability organisation Ceres launched the Valuing Water Finance Task Force in partnership with the Dutch Government and investors including the New York State Common Retirement Fund, CalSTRS, AP7, SEB, the Government Employees Pension Fund of South Africa and the UK Local Authority Pension Fund Forum. 

The project, described as a ‘Climate Action 100+ for water’, has been assisting with research to raise awareness of “negative impacts of corporate practices on water supplies” and identify the “industries and practices linked to the most severe and systemic of these impacts.”