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By Jade HuangPortfolio Manager, Calvert Research and Management

Washington - World Oceans Day, celebrated annually on June 8, was created as a way of encouraging everyone to celebrate the role that oceans play in our lives. It also highlights the importance of water in general, essential to survival but a scarce resource for so many.

Countless water-related challenges need addressing: Today, 2.1 billion people still lack access to safe drinking water and 4.5 billion people lack safely managed sanitation services, according to the World Health Organization. These numbers will almost certainly rise in the coming years. Global demand for water is predicted to increase by 55 percent from 2000 to 2050. Meanwhile, we have aging water infrastructure in developed markets and a need to expand access in emerging and frontier markets.

This will also have impacts on the natural environment. Our oceans -- and the livelihoods of more than 3 billion people dependent on them -- are threatened by the impacts from climate change, overfishing, pollution and biodiversity loss. By 2050, there will be more plastic in the ocean than fish.

An investment case for action

The reality of water scarcity means that stewardship is a financially material issue for many industries. Water is essential for natural resource inputs along manufacturing supply chains; negative impacts on scarce water resources can influence a company's social license to operate and can impact consumer preferences.

Companies that operate in drought-prone, high water risk areas carry increased risks. For example, a typical semiconductor manufacturing facility uses 2 to 4 million gallons of ultrapure water per day. Many of the largest manufacturers are located in Taiwan and China, both of which are high water stress regions. This industry faces high rates of growth fueled by semiconductors' ubiquity in modern society and the increasing rate at which consumers replace electronics. Demand for water will only grow with more-compact next-gen chips, which require 1.5 times the water to manufacture, given lower tolerance for impurities. All these factors contribute to the heightened water risk for this industry. Companies that can mitigate this risk through strong water management may be able to both lower the risk of operational disruption due to conflict over scarce water resources and foster operational cost efficiencies over time.

The way forward

Responsible investors can play a role in water stewardship efforts. One critical need is for better disclosure on industry-specific water impacts. Industries' impacts on their local watersheds vary. Some industries consume vast amounts of water, while other industries' water impacts come from the conditions of water discharge. Understanding the specific impacts of a company on the environment and the communities it operates in is dependent on better company disclosure. Active engagement directly with company management is one way to advocate for more transparency and consistency of this information.

However, given that water scarcity is an issue that is intertwined with other environmental challenges, including climate change, there is a need for a concerted global effort from governments and corporations to effectively address the issue of water shortage.

Calvert's global water approach

At Calvert, we believe in investing along the water value chain in companies that are actively addressing these global water challenges. We invest in water utilities, water infrastructure and water technology companies that serve on the supply side, as well as companies in water-intensive industries that are leading in their water stewardship and water efficiency. Each of these companies is part of the solution to global water issues. We also have a team of ESG research experts that understand best practices and focus on industry leaders in water stewardship.

Bottom line: It is critical for investors to play their parts in encouraging companies to be effective water stewards. Calvert's global investing in water is differentiated because of its consideration of the demand and supply side, and its emphasis on driving positive impact around the globe.