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“Blue Economy” & “Water Footprint” as KPI for Asset Managers

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Key Takeaways

Water Stress

  • Only 3% of the world’s water is freshwater, and two-thirds of that is tucked away in frozen glaciers or otherwise unavailable for our use. (WWF)

  • The cost of inaction is over five times the cost of action. Disclosures through CDP indicate that the potential financial impacts of water risks are far greater than the costs of addressing them. (CDP)

  • Today, 41% of the world’s population lives in river basins that are under water stress. Concern about water availability grows as freshwater use continues at unsustainable levels. (WWF)

  • By 2025, two-thirds of the world’s population may face water shortages. And ecosystems around the world will suffer even more. (WWF)

Global Agreement

  • Countries pledged to protect 30% of the ocean, land, and coastal areas by 2030 (known as ’30 by 30’) within the UN’s Global Biodiversity Framework agreed upon in December 2022 at the Convention on Biological Diversity.

  • Almost two-thirds of the planet’s surface is the ocean and the seas makeup 95% of the Earth’s total habitat by volume. But, only 1% of the high seas has, up until now, been under any protection protocol and just 39% of the ocean falls under the national jurisdiction of individual countries. (World Economic Forum)

  • In March 2023, UN delegates reach a historic agreement on protecting marine biodiversity in international waters. The objective of this Agreement is to ensure the conservation and sustainable use of marine biological diversity in areas beyond national jurisdiction, for the present and in the long term, through effective implementation of the relevant provisions of the Convention and further international cooperation and coordination. (UN)

  • "The sustainable use and protection of water and marine resources" is one of the six environmental objectives of The EU Taxonomy Regulation. While the Common Ground Taxonomy has analysed 80 activities across six sector, one of which is the "water supply; sewage, waste management and remediation activities" sector.

Blue Economy

  • Oceans are not just a habitat for millions of species. They are also a provider of more than half of the world’s oxygen, a major absorber of carbon dioxide, an important source of food and medicines, an employment generator, and a key determinant of environmental health. Waterways are considered to be the main routes for trade, and international shipping transports more than 80% of global trade all over the world, according to data from the UN International Maritime Organisation. (Nasdaq)

  • “The annual gross marine product (GMP) is at least $2.5 trillion; the total “asset” base of the ocean is at least $24 trillion,” according to a report by the World Wild Life. (Nasdaq)

  • Between 2018 and 2022, 26 blue bond transactions took place, amounting to a total value of USD 5.0 billion, with a 92% CAGR between those years. Currently, blue bonds represent less than 0.5% of the sustainable debt market. (Pieter Bosmans and Frederic de Mariz, 2023)

  • Water is much more than the source of life. It can also be a source for portfolio diversification. Like gold and oil, water is a commodity—and it happens to be rather scarce nowadays. So, as with any other scarcity, the water shortage creates investment opportunities. (Investopedia)

Water Funds

  • There are 53 water funds worldwide, with combined assets of US$36 billion, according to Morningstar’s Thematic Fund Notebook. (Morningstar, 2022)

  • Where there are functioning markets, scarcity raises prices. But unlike energy and most commodity markets, the water business is fragmented and controlled by agricultural, municipal, and industrial interests. Because water funds cannot invest in water rights or gain direct exposure to the price of water, they invest in proxies: utility, transportation, and technology companies that they believe are themselves exposed to the price of water. (Morningstar)

Plastic Problem

  • Current methodologies do not allow us to better understand the impact of plastic leakage along the value chain, ultimately preventing us from measuring the extent of the plastic pollution problem. (IUCN)

  • Studies show that if no action is taken to address the projected growth in plastic production and consumption, the amount of plastic that enters the ocean each year will nearly triple by 2040. However, the use of technology and other solutions “together could reduce by 2040 about 80% of the plastic pollution that flows into the ocean annually.” (Pew Charitable Trusts)

Current Status

CDP’s 2022 Global Water Report shows the huge untapped financial opportunities which come from valuing water and points out that water security will not be achieved without strong private sector leadership. Some of the key findings from CDP’s 2022 water disclosure:

  • 85% increase in disclosure over the last five years

  • CDP disclosures of private sector water data have grown exponentially in the last decade, as pressure on freshwater rises, and momentum to mandate water reporting builds.

  • 3,909 companies disclosed water-related data through CDP, a 16% increase from 2021

  • 2,718 global brands disclosed CDP with a combined financial value of US$436 billion worth of water-related opportunities, and it is 4 times more opportunities for those firms integrating water into their business strategy. In 2022, CDP respondents including H&M, Proctor & Gamble, and Microsoft, reported a suite of opportunities being realized that could make them a combined US$436 billion, with an average of over US$250 million per company. 45% (1,729) of respondents reported 2,718 water-related opportunities that could have a substantive financial or strategic impact on their business. A third of these are currently being acted on, 40% will be realized in the next one to three years, and a quarter will take more than three years to accomplish

  • 4,568 companies including Apple Inc., Tesla, Inc., and Shell refused to respond to their requests to disclose water-related data. With environmental disclosure becoming the norm, companies that fail to respond will increasingly become outliers

  • 107 countries remain off track to hit the goal of sustainably managing their water resources by 2030. Acceleration is most urgently needed in South and Central America, the Caribbean, Oceania, South Asia, Central Asia, Central Africa, and West Africa

  • <15% of countries have the financial or human resources needed to implement water, sanitation, and hygiene plans

  • 1/3 of the world’s people, mainly in the least developed countries and small island developing states, are not covered by water-related early warning systems

If you are looking for a Business Guide to engage with your portfolio companies, please contact GC Insights and check out our latest: “Water Footprint” as Key Performance Indicator - A Business Guide.

Table of Contents

Key Takeaways

A Deal on International Water

Financial Products on Water Strategies

SFDR Article 9 Water-Related Products

Blue Bonds

Ocean Carbon Sink Index Insurance Policy

Example KPIs for Assessing Businesses’ Water Performance

The EU SFDR’s Subset of Reporting Factors Relates to Water


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GC Insights: Water risks and opportunities are crucial yet understated. Companies are tasked to set water-related targets for operations and investments and start consistently tracking measurable and quantifiable key performance indicators for both water resources management and water risks management. If you are not sure how to measure your water performance and the water performance of your portfolio, please contact us and continue reading our latest research here.

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