Introduction | Aquanomics: Water, climate and finance

No water, no beer. Anheuser-Busch InBev boss Carlos Brito repeatedly made this point at Reuters Breakingviews’ inaugural “Aquanomics” event in September. It’s a worrying mantra that holds true for nearly every industry, from agriculture to semiconductors. Water is already an increasingly scarce resource in many parts of the world, thanks to its unequal distribution and a rapidly rising global population whose water needs will rise 55% by 2050.

Climate change is exacerbating the crisis, bringing more floods, like the one that recently submerged much of Venice. It brings changes in rain- and snowfall patterns, and more pollution of water sources from industry and agriculture – as well as longer and more frequent periods of aridity.

These pose a variety of financial risks to businesses that far outweigh the minimal cost most pay for water. Those for whom water is a core ingredient in their products, from brewers like Heineken and AB InBev to consumer-goods companies like Levi Strauss and Unilever, are looking at everything from reuse to reforestation to secure their supplies.

But the risks are far more extensive than that, affecting power generation, soil health and crop yields, water purity and plenty of other factors. A drought in Germany last year, for example, took a toll on one of the world’s largest salt and potash suppliers. K+S took a roughly 100 million euro hit to the top line, around 11% of quarterly revenue, because it had to curtail production for 64 days after the water levels of a river near its plant fell too low for the company to pipe wastewater.

Breakingviews started covering the impact of water on companies and investors some six years ago; our first major column on the topic can be found at the end of this e-book. In addition to big risks, climate change also brings opportunity to the water sector, with investments capable of producing decent returns, possible mergers and acquisitions, and broader economic benefits.

Research from think tanks and advocacy groups such as Ceres and World Wildlife Fund suggest the business world is recognizing how water risks are being supercharged by climate change and that they need to be addressed. But it’s slow going. Consider this e-book the first drop of a coming flood.

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Aquanomics: Water, Wall Street & Climate Change

Panel: Piping water into climate risk – Levi Strauss’s Michael Kobori, Nicola Fritz of Impax Asset Management, Ceres’s Brooke Barton and Water.org CEO Gary White lay out the case for companies and investors to make understanding their H2O exposure a priority. Watch the video

Panel: How opportunities flow from H2O – P&G’s Virginie Helias, Jayanthi Iyengar of Xylem, Water Asset Management’s Marc Robert and Mike Brown of San Francisco Water explain how tackling rising temperatures offers ways for businesses and investors to stand out from the crowd. Watch the video

IMAGE: REUTERS/Danish Siddiqui