Tag Archives: climate change and floods

How to Find the True Cost of Water

At current rates of consumption, the demand for water worldwide will be 40% greater than its supply by 2030, according to the UN. Portfolio managers are realizing that physical, reputational and regulatory water risk could hurt their investments, particularly in thirsty industries such as food, mining, textiles and utilities.

One worry is that shocks to supply could drown or dry out a company’s assets. In recent years Coca-Cola has been forced to close plants in India because of drought. In 2019 floods in America’s Midwest caused disruptions at the facilities of two food giants, Cargill and Tyson Foods. A survey by CDP, a non-profit firm, found that 783 big listed companies had faced a total of $40bn of water-related losses in 2018.

Another concern is that the price a company pays for water could rocket. The market price of water does not reflect the environmental and social costs of using it. Government subsidies also mean that companies often do not pay for its true cost. As aquifers are depleted, though, subsidies could become more costly and unpopular, forcing governments to retract them. S&P Global Trucost, a data provider, reckons that if Fortune 500 companies paid the true cost of water, based on estimates of scarcity, rather than current prices, their profit margins would shrink by a tenth. Margins for food, drink and tobacco firms would fall by three-quarters.

Disclosures of water risk are even patchier than those of greenhouse-gas emissions…Established names like Bloomberg and S&P Global are plugging the gap, as are startups. The result is that investors can approach management armed with data rather than questions. “We are getting rid of the black box that companies hide in.” 

Ceres, a non-profit firm, scores businesses on everything from direct water management to risks in the supply chain. Those seeking more detail can use visual tools, such as Bloomberg’s “maps” function, which plots a company’s facilities over a heat map based on water stress. (California is the same color as swathes of sub-Saharan Africa; far-eastern Russia looks a lot like western Europe.) Firms like Aquantix go further, and try to predict the financial cost of water risk.

The accuracy of such forecasts is not yet proven. For Andrew Mason of Aberdeen Standard Investments, though, they are still useful. They show companies that investors care about water risk and encourage them to share data. “This is where carbon was ten or 15 years ago,” he says.

Excerpt from An expanding pool: Investors start to pay attention to water risk, Economist, Jan. 9, 2021

Defenses Against the Sea: Bangladesh

Facing the bleak prospect of millions of its citizens being displaced in coming years due to storms and sea level rise caused by climate change, Bangladesh is building up existing coastal embankments in a bid to protect coastal lands and people. On November 2015, the Bangladesh Water Development Board (BWDB) signed a deal with the Chinese firm First Engineering Bureau of Henan Water Conservancy to start work on the Coastal Embankment Improvement Project-1… And as per the agreement, the Chinese firm is helping rebuild four polders in two coastal districts – Khulna and Bagerhat.

Bangladesh is a low-lying delta, making it one of the most vulnerable countries to climate change. The coastal region adjoining the Bay of Bengal is characterised by a vast network of active tidal rivers. The strength of the tides and the flatness of the delta causes the tides to influence river processes a long way upstream in the southern estuaries. And climate change has intensified the tides in recent years.

“We will repair all 139 coastal polders considering the climate-induced changes presumed to take place by 2050 to protect coastal people from recurrent climatic disasters like cyclone and storm surge,” Water Resources Minister Anisul Islam Mahmud told IPS.  He said the water development board is currently working to rebuild 17 coastal embankments in its first phase, and the remaining polders will be repaired gradually.

The Coastal Embankment Improvement Project Phase-1 (CEIP-1) involving 400 million dollars to rebuild 17 polders in six coastal districts – Khulna, Satkhira, Begerhat, Pirojpur, Barguna and Patuakhali. The height of 200-kilometre-long embankments will be increased by one to two metres and 58 regulators will be set up in the first phase.

Since the 1960s, Bangladesh built 139 polders to protect about 1.2 million hectares of land from seawater…

Excerpts from Rafiqul Islam , Raising Walls Against the Sea, IPS News Service, May 12, 2016