AUS
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UK
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GER
ESP
ITA
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Sara Rosner| Director—Responsible Investing Research
What You Need to Know
Water security represents a critical challenge for the world: how to address too much, too little and too-polluted water. In this paper, we advocate a new approach to managing water risks, aimed at securing better outcomes for communities, companies and investors.
| 40% estimated global shortfall in freshwater supply by 2030 | US$225 billion of listed equity value at risk | At least US$10 billion total invested in First Quantum Minerals' Panama copper mine before it was forced to close |
Executive Summary
Water security is a growing risk for companies, forcing investors to recognize and address their exposures. Failure to manage water risks can inflict material damage on business and investment outcomes, while companies that are strategically focused on the issue could enjoy tangible competitive advantages.
Investors seeking to manage material water risks have so far relied largely on disclosure requirements to influence corporate behavior. But a data-disclosure approach—though valuable—has notable limitations.
To overcome this problem, we propose stakeholder management, an approach that focuses on engaging local stakeholders to address water risks. By combining the disclosure regime with better awareness of local needs, we believe companies can make their water stewardship more effective.
Our analysis of companies in three water risk—prone industries—metals & mining, beverages and semiconductor manufacturing—led us to develop a versatile, five-part framework for investors. This framework is designed to both assess and improve companies’ stakeholder management practices.
We believe our approach provides an opportunity for investors to engage1 with companies and help guide them through the complexities of water security toward more sustainable and value-enhancing outcomes.
1 AllianceBernstein (AB) engages issuers where it believes the engagement is in the best financial interest of its clients.
The views expressed herein do not constitute research, investment advice or trade recommendations, and do not necessarily represent the views of all AB portfolio-management teams, and are subject to change over time.
Learn more about AB’s approach to responsibility here.
