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The True Cost of Water
Investor intel: new research reveals high price of industrial H20 use
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ONE BIG NUMBER
What’s the true cost of water? For companies in the global Consumer Staples sector (think apparel, agriculture, and healthcare) utility bills rarely tell the full story.
According to new research from Barclays, a more accurate metric for water consumption would account for tariffs across emerging and developed markets, the direct and indirect costs of droughts and floods, plus insurance against these risks, reputational damage from water use deemed irresponsible by consumers, and the impact of water shortages on future growth.
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With municipal water prices around the world doubling over the past decade and governments penalising heavy industrial users, water stress is a growing corporate concern. A key indicator of this anxiety can be heard on earnings calls, in which mentions of “clean water and sanitation” have doubled over the last 15 years.
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The good news is that this new research also shows that mitigating water-related risks is worth the investment for many subsets of the Consumer Staples sector.
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COMMONLY HELD QUESTION
What does this mean for investors?
Consumer Staples investors can prioritise water risk as a top ESG concern and understand the ways companies in their portfolios address water management, such as:
- Reducing: Adopting rainwater, irrigation management, and other smart technologies, and including water use in published company KPIs
- Reusing: Developing closed loop water processes for manufacturing that allow for use, purification, and reuse of water
- Recycling: Using gray water for cooling towers, industrial fire protection, production and other plant maintenance needs
- Reclaiming: Returning water to the environment or to other uses after treatment
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