The financial community increasingly understands and accepts that the global climate and biodiversity crises are a systemic and financial risk. This has spurred action. Similar efforts to address the global water crisis have been slower to gain traction.

The longer it takes finance to elevate water security in decision-making, the more we put society and the economy at risk. At least half of the industries in the U.S. economy face significant water risks. This is illustrated by the finding that 50 percent of the stocks listed in each of the four major U.S. stock indices are in industries with medium to high water-related risks.

Some 69 percent of equities listed globally face around $300 billion of corporate value at risk, and billions more in stranded assets. The cost of water risks to business could be more than five times greater than the cost of acting now to address those risks, a gap that dramatically increases financial exposure.

There are practical steps that financial institutions can take right now to protect themselves from the risks created by the water crisis and to have a positive impact on water security. Here are several ways that capital market players can act:

  1. Assess and disclose finance’s water impacts and risks 
  2. Engage with companies
  3. Invest in water crisis solutions
  4. Advocate for stronger regulation

Regulators are key to avoiding further disconnect between the economy, which is increasingly exposed to water risks, and the financial system, which is artificially shielded from them.

Read the full article about water security by Kirsten James, Cate Lamb, and Xavier Lefaive at GreenBiz.