Calls for “joined–up thinking” from policymakers, financial institutions and investors ahead of the UN 2023 Water Conference this week.
UN Secretary-General António Guterres has called for “a bold Water Action Agenda” to emerge from the UN 2023 Water Conference starting Wednesday, but industry experts are readied for disappointment.
“We already know that the outcome of [the UN 2023 Water Conference] is going to be incredibly disappointing,” said Cate Lamb, Global Director of Water Security at CDP, an environmental disclosure platform, told ESG Investor, noting that there will be “no negotiated text” outlining global commitments on water similar to that seen on climate at COP27 or biodiversity at COP15.
The UN 2023 Water Conference is the first of its kind in almost five decades, with the event aiming to mobilise global action for water resilience and security.
CDP expects the only outcome from the event will be a “summary of proceedings”, meaning an outline of minutes of the meeting. “After 50 years, it’s incredibly shocking to find ourselves in this situation,” said Lamb.
Lindsey Stewart, Director of Investment Stewardship Research at Morningstar, told ESG Investor that an agreement on water risks is necessary, resembling the outcomes on climate and biodiversity at the latest COPs, which would commit governments to take action on addressing water-related risks.
However, he admitted that based on the itinerary for the upcoming conference that the Water Action Agenda is unlikely to have “ambitions as high as that”, given that much of the action needed is “highly localised in nature”.
Stewart remained hopeful that the water conference this week will “focus minds on the kind of action that is needed”.
The sustainable management of water risks is an area where “joined-up thinking really can help”, he said. “First, by including a specific focus on water, either as part of asset managers wider engagement efforts on natural capital and biodiversity, or by considering it as a specific area for impact strategies to target.
“Second, by engaging with policymakers to develop appropriate minimum standards for companies to report on the risk management approach to water-related risks,” he said.
Stewart added: “We’re still a long way from having a comprehensive framework for risk management and disclosure that addresses systemic environmental risk as a whole.
“Unfortunately, it looks like there’s still this piecemeal approach that underestimates the extent to which all these issues overlap. If we manage to address that, we would have a greater chance of success with all the SDGs, not just Goal 6.”
The Water Action Agenda will be the main outcome from the upcoming UN 2023 Water Conference. It is a compilation of all water-related voluntary commitments concerning the second half of the 2030 Agenda for Sustainable Development and the second portion of the Water Action Decade 2018-2028.
Water risks rising
There are 11 global indicators that track progress towards Sustainability Development Goal 6 (SDG 6 – access to water and sanitation for all), but targets remain off-track, jeopardising the entire UN sustainable development agenda, according to Lamb.
“We are significantly behind on targets, with around 85% of all water that leaves sites, factories and farmhouses currently untreated,” she said, adding that this poses an environmental and human health risk.
Further, the volume of water available in most key regions to individuals, industry and farmers is increasingly coming under pressure, she said.
Four billion people – almost two thirds of the world’s population – experience water scarcity for at least one month each year, with 700 million people potentially displaced by intense water scarcity by 2030. These figures are expected to rise significantly by 2050 under two-degree scenario, said Lamb.
Mobilisation in the political realm on water is weak because there is not sufficient pressure coming from society to take action, she explained, adding that the water-related issues have only recently risen up the agenda in the UK after concerns about the level of sewage pollution in British waters.
“Water is cheap which means it doesn’t appear on companies’ balance sheets,” said Lamb, noting that water-related risks “barely feature” in boardroom decision-making despite companies, particularly those in processing industries such as chemicals and mining, heavily exposed to the risk of water scarcity.
Mandatory water disclosure
Ahead of the UN 2023 Water Conference, CDP sent a letter on behalf of 31 investors calling on governments to commit to ambitious domestic short-term water targets and implement mandatory water disclosure requirements aligned with Target 15 of the new Global Biodiversity Framework.
“Without adequate water-related information, financial institutions and investors are not able to make informed investment decisions and understand the water risks that they are exposed to,” said Lamb, adding that 70% of public companies disclosing to the CDP on water are exposed to “substantive” water-related risks that could impact their business in one to three years.
Over the past decade, CDP has sought to drive action on water amongst the world’s largest companies and financial institutions via its water questionnaire. In its latest edition, CDP found that of the 1,226 financial institutions invited to disclose, 556 responded on questions about climate (45%) and only 275 (22%) on water.
Despite a lower level of disclosure on water, the report findings suggest a growing awareness of water risks and opportunities for investment, with financial institutions able act “top-down to catalyse transformative action to secure water”.
Water-related risks already account for an estimated US$15 billion of assets stranded or at risk, and compound the human, environmental and nature loss crisis, the report added.
In its latest water report, CDP outlines the untapped financial opportunities valued at US$436 billion for companies that commit to addressing water security.
The Corporate Sustainability Reporting Directive (CSRD), which came into force in January 2023, represents a significant expansion of mandatory sustainability reporting. The first companies will have to apply the new rules in financial year 2024, for reports published in 2025.
Strong investor stewardship on water will require an assessment of key risks to investee companies’ operations and finances, including those that appear indirectly through companies’ dealings with stakeholders and communities, explained Morningstar’s Stewart.
It will also require investors to “request clear and informative disclosures” and the “following up with well targeted engagement and voting”, he added.
The UN 2023 Water Conference will take place at UN Headquarters in New York, 22-24 March 2023, co-hosted by Tajikistan and the Netherlands.
