As more corporations focus on tracking their Environmental Sustainability and Governance performance, there is a need to understand what needs to be understood when it comes to water risk. The details included in the ESG factors focused on water may vary depending on the investor, organization, or context, but here are some common areas that are considered:
- Water Management: This refers to how a company manages its water resources, such as water usage, efficiency, conservation, and recycling. ESG investors may look for companies that have implemented water-saving technologies or have set water reduction targets.
- Water Pollution: This refers to the discharge of pollutants or wastewater into water bodies that can harm aquatic life and affect water quality. ESG investors may look for companies that have implemented measures to reduce their impact on water pollution, such as using environmentally friendly processes or treating wastewater before discharge.
- Water Scarcity: This refers to the availability of freshwater in a particular region or area. ESG investors may evaluate how companies are addressing water scarcity by considering water risk assessments, water usage patterns, and water supply chain management.
- Water Governance: This refers to how a company manages its water-related risks and opportunities, including its policies, procedures, and practices. ESG investors may evaluate a company’s governance practices related to water, such as the integration of water management into the company’s risk management framework or its compliance with water regulations.
- Social Impacts: This refers to how a company’s water management practices affect local communities and stakeholders, particularly those who may be vulnerable to water scarcity or pollution. ESG investors may evaluate a company’s social impact by assessing its engagement with local communities, including its water-related philanthropic initiatives or community outreach programs.
Overall, the ESG factors focused on water aim to assess a company’s impact on the environment, social welfare, and governance practices related to water. By evaluating these factors, ESG investors can gain insights into how a company manages its water resources and identify potential risks and opportunities.