* Risk includes financial fallout from droughts, floods
* Affects food, agriculture, energy, other industries
* Online Aqua Gauge assesses businesses' water management
By Deborah Zabarenko, Environment Correspondent
WASHINGTON, Oct 18 Food giant Nestle Ltd and miner Rio Tinto are among the
companies best placed to cope with water risks from floods,
droughts and pollution, according to a new investment tool
released on Tuesday.
Geared to institutional investors, the Aqua Gauge released
by the Ceres coalition of investors and environmental groups
measures how well companies are prepared for water scarcity and
water stress, which are forecast to worsen in coming decades.
Consultants McKinsey & Company estimate a possible 40
percent global shortfall between forecast water demand and
available supplies by 2030, Ceres President Mindy Lubber said
in a telephone news briefing.
"Few companies are fully disclosing their water risks to
investors, nor are they taking measures to manage those risks,"
Lubber said. "Investors need this tool."
A report accompanying the release of the gauge showed some
companies leading the way, including Nestle, which has a
customized water risk mapping tool, and Rio Tinto, which is
working to put a financial value on water in mining
"Climate change and population growth will only add to
water scarcity pressures," Lubber said.
The impact of water scarcity and water stress -- what
happens when demand for water exceeds supply or when poor
quality restricts use -- has already hit water-intensive
companies and supply chains in Russia, China and across the
southern United States, Ceres said in a statement.
APPAREL, GAS AND FOOD
The coalition said this has in turn affected:
-- Apparel-maker Gap Inc , which dropped its annual
profit forecast by 22 percent after record drought devastated
the Texas cotton crop, a major source for the company;
-- Gas producer Toreador Resources, whose stock price
dropped 20 percent after the French government banned shale-gas
fracturing, also called fracking, primarily over concerns about
what the process does to water quality;
-- Kraft Foods Inc , Sara Lee Corp and
Nestle, which all announced planned increases in prices to
offset higher commodity costs caused by droughts, flooding and
The gauge was created with input from 50 investors,
companies and public interest groups with a collective stake of
more than $1 trillion under management and lets users score a
company's water management against competitors.
Jon Lukomnik, executive director of the IRRC Institute,
which funds research on corporate responsibility, noted in a
telephone news briefing that, on a recent trip to China, he saw
presentations from two mainstream investment banks -- HSBC and
CLSA -- that included water risk.
"Why were these mainstream investment banks spending time,
resources, personnel and money explaining water risk in China
to us?" Lukomnik said. "It turns out that nearly 40 percent of
China's food production comes from water-stressed areas; 53
percent of China's industrial output is in water-scarce
regions. Water input costs for manufacturing are expected to
rise by a factor of three to five times in just a few years."
Greg Koch, global head of water stewardship at The
Coca-Cola Co , said at the briefing he would look to the
gauge as a road map, noting that, because the company's
beverages are bottled locally for each community they serve,
"the health of our business is completely dependent on the
health of that community and that watershed."
Visible online at www.ceres.org/aquagauge, the investment
tool lists key areas of corporate water management.