13 July 2021
Environmental Finance's 'Water Risk and Investment Opportunities' event included a half-day of presentations, a panel, and a live discussion group. It was the third in a series of thematic briefing afternoons that Environmental Finance is running throughout the year on the topic of Natural Capital Investment.
The event opened with a keynote from non-profit CDP's water security director Cate Lamb, who outlined the challenges for water-related risks. Lamb said that the transparency of water-related risks at companies continues to remain relatively low, and investors are underestimating the severity of the situation due to a lack of adequate corporate disclosure.
Lamb also said that water-related risks have "not attracted the attention that climate change and biodiversity loss have for investors".
Next came a panel on the materiality and disclosure of water risk with representatives from asset manager DWS, non-profit Ceres, the Organisation for Economic Co-operation and Development (OECD) and the Valuing Water Initiative.
It was noted by Kathleen Dominique, OECD's financing water lead, that models for assessing risk management to financial institutions "may very well mask some of the water risks and create barriers for them to be actually [recognised as] financially material."
Later in the day, Marc-Olivier Buffle, senior client portfolio manager – thematic equities at Pictet Asset Management, said that water risk has yet to be integrated into mainstream equity investment tools.
Buffle called for mainstream data providers and NGOs to "integrate water-related risks and considerations into mainstream offerings in order to make them more palatable for the average mainstream investor, rather than niche impact investors".
Doing so would "move an enormous amount of capital in the right direction," he argued.
To watch the sessions from Environmental Finance's 'Water Risk and Investment Opportunities' event on demand, click below.
The next event in the Natural Capital Investment series will be on Forestry, Agriculture and Sustainable land-use on 7 September 2021.
Quotes from the conference
Ambika Jindal, lead at the Valuing Water Initiative: "What investors are really looking for is simplification...The frontrunners are engaging quite actively now with NGOs and governments and trying to ask and find out how they can do this. But at this point, it remains voluntary, and I think we need to change that very quickly."
Marc-Olivier Buffle, senior client portfolio manager – thematic equities at Pictet Asset Management: "While several specialised water tools have been developed by various organisations, their specificity makes them less palatable to mainstream equity investors...a global equity investor is not going to take half a day to look specifically at water-related topics."
Paul O'Connell, president of impact investment manager WaterEquity: "There does need to be more [water-related securities] coming from the sell side. Capital markets can be a kind of magic when they do good...The purpose [of the sell side] is to create the securities that will allow capital to flow from the institutions to these kinds of opportunities...The institutions are clamouring for yield...On the water and sanitation side we have tremendous opportunities. What we are lacking are the securities that will sit in the middle and enable the capital to flow."