Impact Blog
Global water stress reaching high-water mark

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By Jade HuangPortfolio Manager, Calvert Research and Management and Yijia Chen, CFAESG Quantitative Research Analyst, Calvert Research and Management

      Washington - Water risk is on the rise globally in terms of quality, quantity and access. Drought and flooding, exacerbated by climate change, are contributing to "extremely high" water stress for 17 countries, home to 25% of the world's population, according to data from the World Resources Institute (WRI).1

      One of the challenges in combating water risk is that different regions face different problems, sometimes all within a single country. Issues of pollution, access to clean drinking water and adequate wastewater treatment are prevalent in rural, more agricultural regions, while many cities face infrastructure and water-distribution challenges. Water-rights issues can create international conflict where countries share boundaries and resources across rivers, lakes and other water. The World Economic Forum consistently names water security as a top global risk.

      According to WRI, countries are under extreme stress when irrigated agriculture, industries and municipalities withdraw more than 80% of the available water supply, on average, every year.2 Another 27 countries are deemed at "high" risk, using more than 40% of their annual supplies. In recent years, cities like Chennai, India and Sao Paulo, Brazil have faced acute water shortages, with Cape Town, Africa in 2018 narrowly averting what it called Day Zero - the day when all its dams would be dry.

      Calvert Blog 9-26-19

      Severe water stress is not confined to the 44 countries in WRI's top categories.3 In the U.S., for example, we have seen pockets of extreme stress in New Mexico and California. Globally, water withdrawals have more than doubled since the 1960s, according to new hydrological models from WRI's Aqueduct tool - and show no signs of slowing down.4 Competition for this limited resource is increasing food scarcity, regional conflict and sanitation issues, and hampering economic growth.

      Responsible Investing and water risk

      Water access and water quality are near- and longer-term risks that Calvert prioritizes in both our investment research and investment philosophy. Via our Calvert global water strategy, we take a solutions-oriented approach, seeking to invest in companies that are proactively working to address global water challenges all along the water value chain.

      Calvert Research and Management evaluates many issues around water scarcity, water quality and access to clean water across four key areas:

      • Water utilities and distributors: Responsibly deliver and provide clean water at affordable rates, which we view as essential for economic growth and development
      • Water technology: Have proven or emerging technologies that test, monitor or improve the quality of water, or address the efficient use of water, helping reduce consumption globally
      • Water infrastructure: Are addressing the growing and urgent need to invest in the rehabilitation of aging infrastructure or expand infrastructure in order to deliver clean water to communities and drive economic growth
      • Solutions providers: Are leading their peers in water efficiency and reuse practices in the most water-intensive industries, effectively reduce overall water demand

      Furthermore, we look at companies providing unique, innovative solutions to global water challenges that actively address water issues outlined in the 17 United Nations Sustainable Development Goals and contribute to poverty alleviation and sustainable development.

      Bottom line: Water risk is an increasing global problem that will likely only be exacerbated in the coming years. Calvert's global water strategies take these risks, and potential solutions, into account.