How to incorporate water concerns in investment portfolios

The importance of carbon footprints has been well established as a critical piece of ESG. But with impact of climate change on economies and financial systems coming into sharper focus, it may well be time for investors to consider another overarching environmental theme: water stress.

“We have found that understanding water-related risks is a vital component of evaluating the long-term sustainability risks and opportunities of an investment portfolio,” wrote Emily Steinbarth, quantitative analyst at Russell Investments.

In a new white paper titled “Moving the climate focus beyond carbon and on to water,” Steinbarth noted that water-related risks are multi-dimensional. Aside from their potentially catastrophic impact on communities, water risks are captured in two-dimensional data sets: any given amount of water consumed has to be indexed against the specific location where it was used.

“As awareness of water risk grows, so too has the availability of tools to incorporate water exposure into an investment process,” the paper said.

Multiple industry-provided frameworks touch on water, including those from the Task force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI). Each framework is able to answer different questions on […]

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How to incorporate water concerns in investment portfolios
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How to incorporate water concerns in investment portfolios
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"We have found that understanding water-related risks is a vital component of evaluating the long-term sustainability risks and opportunities of an investment portfolio," wrote Emily Steinbarth.
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Wealth Professional (Canada)
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