Norges Bank calls for universal approach to water management reporting
NORWAY - Norges Bank Investment Management (NBIM) has warned that the lack of water management and the element's scarcity could increasingly hurt companies' profitability and called for a "consensus" approach to reporting on the issue.
Having earlier this year published its first report on water management - covering more than 400 companies and their approach to disclosure - NBIM has released ratings for the companies, revealing that more than a third of those investigated scored 0 out of a potential 9 points.
It had previously only rated the companies as 'compliant' or 'non-compliant'.
Explaining why only 2.3% of companies achieved full marks - with the manager assessing whether there were clear strategies and policies on water management in place, as well as whether a company's water footprint and the resulting risk this posed were disclosed - NBIM's head of social and environmental issues Magdalena Kettis said this could be the result of a lack of industry-wide disclosure standards.
She told IPE: "Companies are beginning to understand the need of water disclosure, but there is also a problem of finding a standard on what metrics and indicators to use."
Referencing World Water Week in Stockholm, where NBIM presented its findings, Kettis added: "That was one result of the conference yesterday - there is no consensus on metrics, indicators or standards. That process needs to be developed."
She admitted that developing such standards could take several years, but she said NBIM hoped to promote standards by drawing attention to the issue, as it would be of benefit in the long term.
"We want to be able to compare one company with the other," she said.
Kettis also warned that water scarcity was increasingly a threat to companies' profitability.
"This may, in turn, affect the fund's investments," she said.
Norges initially identified more than 860 companies in its investment universe exposed to water risk and then selected 432 to investigate.
Of these, the average rating achieved was 2.7 out of 9 points.
Only 10 companies - from the food sector, as well as one mining company and two from the utilities sector - reported on all nine issues highlighted by NBIM as important.