Investors are looking for substantive change, not ‘greenwashing’
Corporations have increasingly turned to environmental, social, and governance (ESG) investing to make a positive difference and to demonstrate a corporate commitment to sustainability.
But many argue that ESG investing has focused too much on decarbonization and that more emphasis must be placed on water security. Nine of the 10 most serious global risks spring from dwindling water resources. And by 2050, as many as 4.9 billion people will live with elevated water risk.
The Data Sciences team at Barclays Corporate and Investment Bank has reported that water-related chatter in corporate transcripts is up 40% and that companies have been more openly discussing water as rising costs and regulation have become difficult to overlook. Many believe water could soon be the biggest focus of ESG investing.
Water Underrated as ESG Criterion
Discussing assessment models, Barclays warned that investors should heavily weight future water shortages, growing water prices, and increasing water regulation in their decision-making. While companies already are reporting their water costs, Barclays urges a more complete assessment model, with metrics that:
- Consider direct and indirect costs of water risk.
- Equalize tariffs across developed and emerging markets.
- Factor in unexpected costs of extreme drought or flooding.
- Consider the possibility of a tarnished brand reputation when company practices are perceived as irresponsible.
- Factor in drought impacts on growth in the future.
Using a more complete model, Barclays has estimated the realistic cost of water is three to five times what companies report.
Barclays cited an influential Carbon Disclosure Project study, which concluded that companies tend to significantly underestimate their water risk and that response to water crises could cost five times more than proactive preparation..
Warning Against Greenwashing
The World Economic Forum warned that a myopic focus on climate change in ESG investing ignores vital issues such as universal access to water and sanitation, and that an ESG reporting strategy should not be viewed as an opportunity for “greenwashing,” or promoting misleading environmental and sustainability claims.
ESG investors are becoming increasingly wary of such claims. In the United Kingdom, the government’s Competition and Markets Authority has put forth a Green Claims Code to help business comply with consumer protection law when making such claims, requiring that they be backed by meaningful change.
Matthew Diserio, President of Water Asset Management, thinks this could mean an end to long-standing underinvestment. He said:
Water as an industry, really leapfrogs a lot of the ambiguity around quote, ESG investing because of the very clear, positive metrics that are identifiable around the water.
One way to verify ESG claims is through a GRESB Infrastructure Asset Assessment, a global ESG benchmark that helps investors and stakeholders assess ESG performance. At Seven Seas Water Group, we are proud to have received a 96/100 on our 2020 GRESB assessment, ranking in the top global quintile and earning the maximum 5-star rating as an industry leader. Learn more about our commitment to sustainability.
Increasing Water Sustainability
Barclays noted the success of the 4R (reduce, reuse, recycle, and reclaim) approach in producing a substantive benefit for the environment. Companies that use this approach engage in practices such as stormwater harvesting and wastewater reuse. Wastewater reuse, particularly, is valuable to both bottom lines and company ESG assessments.
With the cost of water rising and often significantly underestimated, failure to establish a water management plan that incorporates wastewater reuse can be a significant missed opportunity. Reuse can lower water cost while improving ESG profile in a very real and meaningful way.
Seven Seas realizes that a company’s core mission may be worlds apart from wastewater treatment, so our Water-as-a-Service® (WaaS®) offering responds by helping companies to revolutionize their water management plans without losing focus.
WaaS® is an all-inclusive model that bundles long-term operations and maintenance with up-to-date infrastructure. With flexible financing options, it allows optimal capital use with variable-term, performance-based contracts.
CAPEX and risk can be offloaded to Seven Seas, with clients simply paying for the water services they use. In a landscape full of greenwashing, WaaS® can quickly help companies stand out as ESG leaders. Contact our water professionals to learn how.