Financial institutions threatened by global water crisis

According to a report published by the NGO CDP and the think tank Planet Tracker, the water crisis is exposing financial institutions to significant risks. These risks remain insufficiently taken into account, while global companies in certain sectors are already losing billions of dollars due to water-related problems.

Underestimating water-related risks

According to the statistics portal Statista, the global water market will be worth $500 billion by 2028, compared with $283 billion in 2021. The UN estimates that, if nothing is done, a 40% shortage of the world's water supply could hit the planet by 2030.

Yet, as a recent report by the NGO CDP and the Planet Tracker think-tank reveals, a third of listed financial institutions failed to assess their exposure to water-related risks last year. These risks are numerous, ranging from droughts and pollution to regulatory, technological and reputational disruptions.

Underestimating these risks, 33% of financial institutions simply do not take them into account when granting loans or making investments.

CDP and Planet Tracker surveyed 1,112 listed companies. For 69% of them, water-related risks are likely to have " a substantial impact on their business ". Losses could reach $225 billion.

13.5 billion in frozen assets

According to Cate Lamb, CDP's Global Director for Water Security, companies are already losing billions of dollars because water-related risks are not taken into account. For the financial institutions that finance these companies, it is therefore urgent to take the measure of their exposure and act accordingly.

According to CDP and Planet Tracker, assets worth $13.5 billion are currently stranded in various sectors due to water-related issues, whether in the oil and gas, mining and metals, coal or power utilities sectors.

Several major industrial projects have been blocked in recent years because of water-related problems. In Canada, for example, the Keystone XL oil pipeline project was blocked following a number of controversies, with environmentalists opposing it because of the risk of pollution.

Work on the Pascua Lama open-pit gold mine on the Chile-Argentina border was halted in 2018, generating $7.5 billion in losses. The Canadian group had to back down in the face of environmental associations and opposition from indigenous Diaguitas communities.

The CDP and Planet Tracker report "High and dry: how water issues are stranding assets" lists the public and private financial institutions most closely linked to 42 of the most polluting or risky listed companies. The main shareholders in the coal, oil & gas, power and mining & metals sectors are US asset managers BlackRock and Vanguard, ahead of the French state (Engie and EDF), and behind China (PetroChina) and Saudi Arabia (Aramco).