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.
