Work is needed to fill data gaps and build capacity to shed light on water security risks.
Water impacts are important data gaps across multiple financial risk areas, including credit risk assessments and climate risks.
This theme was discussed in a panel discussion focused on water stress ESG investors Nature data for institutional investors event.
John Willis, director of research at Planet Tracker, said the NGO has been working with the London School of Economics (LSE) on research into the influence of nature-related factors on creditworthiness.
“That’s obviously very important for government bonds and at the moment water stress is not a big problem, the soil is, and water is not, which is actually strange in many ways,” Willis said.
He continued that water risk issues are impacting supply chains, noting that drought and water scarcity at the Panama Canal this year are severely disrupting global trade.
Sue Armstrong-Brown, Global Director, Environmental Standard and Thought Leadership, at global not-for-profit disclosure platform CDP said the financial institutions they worked with were struggling to measure their portfolio’s impact on water security.
“It just wasn’t a priority,” she said, “it’s so low on the ‘to-do’ list. “We need to do that capacity building task,” she said, citing the need for more water-related information, tools and methodologies.
“New dawn” for dates
Armstrong-Brown added that if financial institutions could better understand water security in addition to climate, there would be an opportunity to solve both types of problems.
The Task Force on Nature-related Financial Disclosures (TNFD) guidelines allowed for early discussions on the issue, Armstrong-Brown said, adding that new things were coming to market, such as investor engagement partnerships, that will help “reframe the relationships.”
“We must stop trying to separate water from completely related and intertwined multi-dimensional topics like climate and land,” she told the audience. “We are going to see a new dawn in the development of data related to water security.”
In September, the TNFD published its final recommendations for nature-related risk management and disclosure, which serve as a tool to operationalize the achievement of Goal 15 of the Kunming-Montreal Global Biodiversity Framework (GBF).
The final recommendations are evidence-based and voluntary, building on the market’s experience and progress in climate-related reporting. They align closely with the disclosure framework developed by the Task Force for Climate-related Financial Disclosure (TCFD), and include the same four conceptual pillars: governance, strategy, risk and impact management, and metrics and objectives.
Furthermore, they are consistent with the ISSB’s global sustainability disclosure standards and the impact materiality approach used by the Global Reporting Initiative (GRI) and included in the new European Sustainability Reporting Standards (ESRS), which underpin the EU -Corporate Sustainability Reporting (CSRD) guideline.
Satellite data was also discussed as an emerging way to address risks such as water safety during the event.
Andrew Hodge, chief executive of freshwater intelligence agency Aquascope, said there is “huge demand” for water safety data from the space sector.
“We’ve heard that satellite imagery is starting to lift the lid on deforestation,” he said, while acknowledging that the “challenge,” however, is how to turn those proxies into “real, actionable data” as people move “closer to the edge ”. of what nature can offer.”