GES Newsletter
September 13, 2012

Despite being just as urgent as climate change, water stress has not yet engaged investors as much. In an effort to spark interest for collaborative engagement on the topic, GES gathered two high-level experts and investors to explore the risks – and opportunities.

On September 6, GES hosted a well-attended webinar on water, the first in a series on hot topics of relevance for investors. Jason Morrison, Director of the Pacific Institute and Technical Director for the CEO Water Mandate, commenced by pointing out a very strong motive for investors to care about water: In its 2012 annual report, the World Economic Forum has – for the first time – listed water supply crisis among the top five societal risks with regard to likelihood and severity.

“For companies, particularly those in the food and beverage sector, there is a dual risk around water and food-related issues and this is now driving the thinking of businesses around the world about how water presents a material risk for their operations,“ he explained.

Nevertheless, very few companies are managing these risks adequately. One of the reasons could be that the greatest risks often come from external conditions over which the company has the least influence, like water stress and pollution in basins and watersheds, inadequate infrastructure and lack of government capacity, said Jason Morrison. To address these, companies need to collaborate more, which will be made easier by the new Water Action Hub, presented at the Stockholm World Water Week on August 28-31. It is an online tool where companies can find other stakeholders who are taking action on water in their region and with whom they can cooperate.

Dan Bena, Senior Director of Sustainable Development for PepsiCo, attested to the value of collaboration in the company’s longstanding commitment to water issues, even with competitors, and used this example to send a critical message to governments:

“If Coca-Cola and PepsiCo can work together on issues that are precompetitive, certainly governments should be able to follow suit?”

PepsiCo’s Water Stewardship program integrates water as a core business risk in all its operations and was recently honoured with the Stockholm Industry Water Award at the World Water Week. It also goes beyond direct operations to supply chain and communities, and promises to provide three million people with safe water by 2015. Obviously the company hopes that their consumers will also value this; 63 per cent said in a poll that they would feel more positive about the brand if PepsiCo minimises air and water pollution. Dan Bena also referred to several other strong statistical imperatives for their actions, e.g.:

  • Water scarcity tops the list in the minds of expert influencers across the world, where 87 per cent deem it as urgent, slightly more than the 82 per cent for climate change.
  • By 2030, two-thirds of the world will be suffering water stress. Today, nearly 50 per cent of PepsiCo’s facilities suffer some form of water stress.

Aside from the risks, Tytti Kaasinen, Senior Engagement Manager at GES, also highlighted the opportunities for investors:

“There is no need to wait until risks materialise; dialogues can help in raising awareness and encouraging proactive measures. Investors could develop and communicate a wish list for corporate water disclosure, which is useful for investment decision-making. They could also integrate water considerations in stock analysis and apply positive screening seeking out ‘water winners’ to include in their portfolio, for example companies involved in water purification/sanitation/infrastructure/reuse/treatment.”

The next webinar in GES’ series of hot topics will put the spotlight on Taxation.

For more information, please contact:
Tytti Kaasinen, Senior Engagement Manager