Global water shortages are a greater and more imminent threat to businesses than oil supplies running out, according to a major new report from the Ceres group of sustainable investors which urges firms and investors to undertake water risk assessments as a matter of urgency.
The report, Water Scarcity & Climate Change: Growing Risks for Businesses and Investors, notes that water shortages are already causing disruption to large numbers of businesses and warns that the situation will worsen as the combination of population growth and climate change places further pressure on water supplies.
Mindy S. Lubber, president of Ceres, which represents investors with an estimated $7tr of assets under management, said the business community “needs to wake up to the reality that water is becoming scarcer and will likely become even more so in many parts of the world due to climate change”.
She added that it was “critical” that both businesses and investors assess their exposure to water-related risks and begin to integrate water issues into their long term strategies.
The research assessed a number of industries at risk of disruption from water shortages, including sectors already under pressure from water scarcity such as agriculture, tourism and the beverage industry, as well as fields such as IT and energy that are less commonly associated with high levels of water use but are now facing severe drought-related risks.
The study notes, for example, that IT firms require huge amounts of water for their manufacturing processes with Intel and Texas Instruments alone using 11 billion gallons in 2007 to make silicon chips. Highlighting the potential risk to investors, the study calculated that a water-related shutdown at a fabrication facility operated by either firm could result in between $100m and $200m in lost revenue during a quarter, or $0.02 or $0.04 per share.
Moreover, the report found that 11 of the world’s 14 largest semiconductor factories are in the Asia-Pacific region, where receding Himalayan glaciers make water scarcity risks especially severe.
Similarly, the study warned that electricity generation is equally reliant on stable water supplies and that drought-related power plant shutdowns had already occurred in Europe, Brazil and the southeast US.
The report comes in the same week as one of the world’s top climate scientists warned Congress that many US cities could become uninhabitable as a result of climate change-related heat waves and droughts.
Addressing the Senate’s environment and public works committee, Christopher Field of the Carnegie Institution for Science said that a large number of cities in the south of the country could become unviable. “We are close to a threshold in a very large number of American cities where uncomfortable heatwaves make cities uninhabitable,” he said, warning that Sacramento in California, for example, could face heatwaves for up to 100 days a year.
The testimony, which was led by the head of the UN’s Intergovernmental Panel on Climate Change, RK Pachauri, marked the first time Congress had heard evidence on the threat climate change poses to human health. Previous attempts to provide evidence on the health risks arising from global warming were blocked by the Bush administration.
The hearing was part of a concerted effort by the Democrats to gain support for proposed environmental and energy legislation, including President Obama’s plans for a nationwide carbon cap-and-trade scheme
“If we don’t do it people are going to die,” warned Barbara Boxer, chair of the Senate environment and public works committee and one of the architects of the proposed legislation. “They are going to get sick and they are going to die. “