- First-of-its-kind tool ranks over 200 industrial activities according to their potential impact on water quality and quantity;
- Apparel, financial services and fossil fuels found to have greatest impact;
- Exxon Mobil and Chevron Corporation among companies with ‘critical’ levels of impact that have failed to disclose water-related data to CDP for over a decade;
- Investors and lenders can use tool to assess the potential impact of their portfolios on water resources and water security.
London, 25 August 2021: First-of-its-kind tool, Water Watch: CDP’s Water Impact Index developed by environmental disclosure platform CDP, reveals the world’s most polluting and water-intensive industries.
The latest report from the IPCC highlights the impacts of a changing climate on water resources globally. Extreme weather events such as drought, with its accompanying wildfires, and flooding will increase in severity as climate breakdown takes hold – indeed, with every 1 degree of warming extreme rainfall intensifies by 7%. Managing our global water resources, ecosystems, institutions and infrastructure is vital to enabling us all to thrive in a changing climate.
Launched today, Water Watch: CDP’s Water Impact Index measures the potential impact on water quality and quantity of over 200 industrial activities. The tool can be used by investors and financial institutions to assess the potential impact of their portfolios on water resources and water security. It can also be used by companies to assess the potential water impact of different parts of their business and value chains.
Grounded in independent and trusted academic, scientific and industry-recognized sources, the tool assesses the water impact of each industrial activity at different stages of the value chain. The apparel and textile manufacturing sector, cotton farming, livestock farming, oil and gas extraction and mining are amongst the sectors found to have the largest potential impact on water resources.
Finance too, emerges as a sector having a critical impact on the world’s rivers, lakes, aquifers and streams. The flow of money from banks, insurers and asset managers into high impact companies is enabling agribusinesses to pump ever increasing amounts of non-renewable groundwater, it is enabling tailings dams to be constructed at the heads of free-flowing rivers and it is enabling chemical, apparel and pharmaceutical companies to release toxic pollution, much of which is carcinogenic, posing a real and present danger to human health.
CDP’s analysis finds that some of the world’s largest companies, in the most impactful sectors have consistently failed to disclose their water-related data to investors, through CDP. Of these, Chevron and Royal Dutch Shell are amongst the companies that have failed to do so for over a decade.
This is the first tool of its kind that allows financial institutions to understand the relative impact of different industrial activities on the world’s water resources. In doing so, the tool fills a critical data gap in the efforts of financial institutions to understand and address their exposure to water risk.
Through this tool, CDP hopes to provide the capital markets with the information needed to take action on water security – an area where progress has lagged behind other environmental issues, such as climate change, both in terms of how well the risks are understood, and how well integrated they are into investment decisions. CDP is also working on a tool that couples this impact data with CDP’s corporate action data.
Cate Lamb, Global Director of Water Security at CDP, commented: “Achieving a water secure, net zero future will require a complete transformation of our global economy and urgent action is needed. To succeed, companies responsible for the greatest impacts on water resources must transform their business models, products and practices in ways that decouple production and consumption from the depletion of water resources.
Financial institutions have a critical role to play in facilitating the transition to a water-secure economy. Water Watch: CDP’s Water Impact Index shows that the level of water impact in investment portfolios is significant, with banks, investors and insurers being exposed to critical levels of water impacts, and hence risk, through their shareholdings and loans. Equipped with the right information and robust data, investors can drive progress toward a water secure future.”
Adam Black, Head of ESG & Sustainability at Coller Capital, commented: “We are excited to use CDP’s Water Watch to identify the potential impact of our portfolio on water security. ESG monitoring and engagement are core elements of our programme and we constantly seek new methods, data and tools to enhance our approach. However, as a secondaries investor with indirect exposure to thousands of underlying companies, we recognise the inherent challenges to effective monitoring and engagement. In that regard, we view the Water Watch as a valuable tool to efficiently screen our portfolio for water impact and identify particular company exposures where we may look to engage further on these risks. We look forward to using the tool to inform our work and to continue collaborating with the Water team more broadly as a member of CDP.”
Notes to editor
- The industrial activities included in the tool are derived from The CDP Activity Classification System (CDP-ACS). CDP has over 200 industrial activities within its classification system, these are based on the Bloomberg Industry Classification Systems (BICS). The CDP-ACS is a framework used to categorize companies by the most relevant sectors. It focuses on the diverse activities from which companies derive revenue and associates these with the impacts to their business from climate change, water security and deforestation.
For more information, or exclusive interviews, please contact:
Sara Firouzyar, CDP, tel. +44 (0) 2038 183 973 | email: [email protected]
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 590 investors with over $110 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Over 10,000 organizations around the world disclosed data through CDP in 2020, including more than 9,600 companies worth over 50% of global market capitalization, and over 940 cities, states and regions, representing a combined population of over 2.6 billion. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.