Mother Nature Network: Water Scarcity Means Business for Companies & Investors
Behavioral science shows that humans have an inherent bias toward the status quo – we have a hard time imagining that things we’ve long taken for granted might change.
- Droughts in Russia, China, India and the United States severely reduced wheat yields last year and lead to substantial price hikes. By February 2011, the cost of wheat rose $200 per metric ton over an eight month period – a spike that can have life-altering consequences for people in poor countries.
- A U.S. Department of the Interior study found water flow in the Rio Grande, Colorado and San Joaquin river basins had decreased as much as 20 percent due to climate change.
- A 2009 paper revealed up to a dozen power plants, which need water for cooling, temporarily reduced their output or shut down because of inadequate water supplies, and several states denied proposals for new power plants citing water concerns.
- During a recent drought in Georgia, low water levels led to a severe reduction in hydropower generation, forcing the electric utility Southern Company to spend $33 million to purchase additional energy.
- In October, apparel maker The Jones Group cut its 2010 sales projections amid record-high cotton prices linked in part to drought. Shares of the New York-based clothing maker dropped on the announcement and have since moved lower.
- Citizen protests in Kerala, India forced Coca-Cola to temporarily shut down a profitable bottling plant due to local villagers’ claims that the company had caused their wells to go dry. The controversy drove an anti-Coke campaign leading to product boycotts on college campuses in the United States and Europe.
Wall Street is paying attention as well:
- JPMorgan says water scarcity poses risks to companies across economic sectors, and recommends that investors “assess the reliance of their portfolios on water resources and their vulnerability to problems of water availability and pollution.
- Swiss bank UBS’s investment division warns that water shortages are already constraining economic growth in California, China, Australia and India.
- Goldman Sachs is sponsoring a new data tool to help companies and investors map their factories and investments against global water scarcity “hot spots.”
Brooke Barton is senior manager of the water programs at Ceres.
Ceres leads a national coalition of investors, environmental organizations and other public interest groups working with companies to address sustainability challenges such as global climate change and water scarcity.