Ranking multinational companies on their water usage and efficiency would go a long way to driving change and reducing their water footprints, according to an environmental, social and governance (ESG) specialist.
Piet Klop, senior adviser for responsible investment at PGGM Investments, was speaking at the Water Risk and Finance event on Thursday, put on by Environmental Finance.
He said that water is a complicated commodity, which makes it hard for investors to get their minds around it. But coming up with a ranking to compare large firms on their water efficiency and water usage would help make it clearer which ones were leading the field.
“We can throw companies out of the index. We’ve done that on ESG criteria, selecting the 10% of companies within the FTSE All-World Index that we simply don’t want to invest in”, Klop said.
“You could do the same for water, but only if you’re brave enough to rank companies. Do it as well as you can, but it won’t be perfect.
“Ranking companies is a great thing. It’s the chief motivation, I believe, in a race to the top that we’d like to see. That’s how we then drive changes. We need that incentive and impetus.”
The Environmental Investment Organisation (EIO) recently unveiled a carbon ranking that grades firms based on their greenhouse gas emissions disclosure levels. The water ranking that Klop suggested at the Environmental Finance event would likely seek to follow a similar structure.
A group of investors recently asked for better disclosure on how US water companies are dealing with environmental challenges, including the impact of climate change on water supplies and their strategies for water conservation. This came after World Water Day 2013 had highlighted the long-term opportunities in investing in water.