Why some of the world’s biggest companies are increasingly worried about water scarcity

Major companies from across a range of sectors are increasingly concerned about the cost and availability of the world’s ultimate renewable resource: water. The availability and relatively low cost of water does not tend to capture much attention until it effectively runs out. Yet, with the climate crisis seen as a “risk multiplier” to water scarcity, analysts warn that even companies with relatively limited financial exposure to water risk should brace for disruption.

It comes at a time when water prices are rising around the world. The average price of water increased by 60% in the 30 largest U.S. cities between 2010 and 2019, according to data compiled by Barclays, while California Water Futures have regularly jumped as much as 300% in recent years.

In a research note published June 14, analysts at Barclays identified water scarcity as “the most important environmental concern” for the global consumer staples sector, which includes everything from food and beverages to agriculture and tobacco. Consumer staples, which was said to be the most exposed of all sectors to water risk, faces a $200 billion impact from water scarcity, analysts at the U.K. bank said.

The research found the potential financial impact from water risk was likely to be three times higher than carbon risk. Water prices do not tend to reflect its scarcity, particularly because its use is often at a very low cost or even free. However, the availability of water underpins many parts of the economy and analysts at Barclays have attributed the latest rise in global water prices with the asset’s growing scarcity. The bank estimated that the so-called “true cost” of water was three to five times greater than the price companies currently pay, once direct and indirect costs of water shortages and other risks were incorporated.

Why some of the world’s biggest companies are increasingly worried about water scarcity, CNBC, Jun 29