Giving Compass' Take:

• Feeding Ourselves Thirsty breaks down water use by agriculture companies and offers suggestions for improvement. 

• How can funders advance food and water sustainability together? 

• Read about tackling water and agriculture challenges through impact investing

The $5 trillion global food and agribusiness sector operates at the center of the world’s growing water crisis. Highly dependent on large volumes of cheap water supplies, food companies are also among the first to feel the financial heat of climate change, as rising average global temperatures and shifting weather patterns make fresh water scarcer and agricultural production more volatile.

For an industry that uses more than 70% of the world’s fresh water to grow crops, feed livestock and process ingredients, these are undeniable threats. The UN projects that in order to meet the food needs of a world population of 9.8 billion, the demand for water will increase by 20-30% by 2050. A recent MSCI analysis of food companies in its All Country World Index (ACWI) found that $415 billion in revenue may be at risk from lack of water availability for irrigation or animal consumption, while $248 billion could be at risk from changing precipitation patterns affecting current crop production areas.

Food companies are not only at risk due to water scarcity, they are also responsible for it. Agriculture is rapidly draining aquifers in many regions of the world, and meat production is one of the biggest polluters of watersheds globally.

Key findings
  • Of the 35 publicly traded companies evaluated, 77% now specifically mention water as a risk factor in their financial filings, up from 59% in 2017.
  • Despite this growing awareness, effective management of water risk still lags, with an average overall company score of 38 out of 100. Meat companies, which are particularly vulnerable to water risks, also continue to do the least to manage them.
  • Food companies can make their supply chains more resilient by supporting sustainable farming practices in the watersheds where their most significant commodity inputs are sourced. Yet 37% still lack goals to source crops in ways which reduce impacts on water use and quality. Additionally, existing goals often lack clear definitions, implementation plans and measurements of progress.
  • By supporting farmers’ transitions to more sustainable methods of production, companies can fortify their supply chains against the extremes in weather that are increasingly frequent due to climate change. Yet less than half of companies evaluated provide any form of financial support to growers to encourage adoption of more resilient agricultural practices such as efficient irrigation, low-till/no-till, cover-cropping, optimized fertilizer application or diverse rotations.