National Water Week | Day Zero may seem like a lifetime ago but water scarcity is here to stay

As shopping centre aisle fisticuffs moved from 5L water bottles to toilet paper with the onset of the COVID-19 pandemic, many other crises – like water scarcity and Day Zero – took somewhat of a back seat.

But National Water Week – currently taking place and culminating in World Water Day celebrated annually on 22 March – serves as a sobering reminder that although the severity of the drought may have lifted for now, and our focus may have shifted to more pressing matters in the short term, water scarcity is here to stay. This is according to Hannah Simons, Head of Sustainability Strategy at global asset manager, Schroders, who adds that along with other climate change issues, water scarcity is one of the most pressing challenges and has the potential to have a profound impact on investors and retirement savers.

“Investors must get to grips with the risks posed by water scarcity – and understand the opportunities,” says Simons. "Water scarcity is absolutely an issue that should be on investors’ radars, but the answers aren’t straightforward. Water is a much more localised matter than, say, climate change, and the degree to which a company you might invest in is at risk of water shortage is not always clear.

"In practice, that means investors need to develop a firm understanding of the challenges that water shortages might present, and where these will bite. But they also need to think about what those issues might mean for an individual business,” says Simons.

She uses the example of a drinks manufacturer, who very obviously has an exposure to water, but not necessarily any more so than a business that uses water in its supply chain or its production processes.

"Still, it’s true to say that the value of water – or the cost of a lack of it – could be high enough to have a material impact on a business. We’ve already chosen not to invest in companies as we believed their exposure to water shortages was too big a risk.

"Equally, while water has so far been priced to reflect its basic necessity for life, we’ll need to find new ways to incentivise investment in water, and that will create new opportunities and value," says Simons.

She adds that investors committed to climate change would do well to look at available sustainability focused investment funds where the managers understand these risks and opportunities.

ENDS