Investor engagement, increased regulation and greater attention to water risks by corporates and utilities are yielding gradual but uneven improvements in stewardship and mitigation, according to new reports.
A benchmark study of performance against six expectations across four water-intensive industries found that 48 firms had improved their scores since 2023, while 20 had declined.
Ceres, a US-based sustainability-focused non-profit organisation that coordinates the investor-led Valuing Water Finance Initiative, said higher scores were the result of stronger overall action by corporates, as well as expanded disclosure in line with Europe’s Corporate Sustianabilty Reportind Directive.
The report said more firms were meeting the benchmark’s more advanced indicators, including conducting impact assessments for water availability, quality, and ecosystems, in addition to assessing nature-related risks.
Firms across the four sectors – food, beverages, apparel and technology – performed best against the water quantity expectation, meaning they are taking more effective action to avoid negatively impacting water availability in water-scarce areas across their value chains.
This is mainly achieved via continued prioritisation of target setting, including new commitments, greater ambition through expanded value chain scope or contextual targets, and “more clear strategies that include progress updates”. Performance was weakest on the water quality expectation, and declined for the benchmark’s ecosystem protection expectation.
Separately an investor engagement report focused on 11 UK water utilities reported “significant improvement” in performance against 19 expectations grouped into four areas – climate change, adaptation, biodiversity, affordability and anti-microbial resistance – between 2023 and 2024.
The report said the improvements were driven by a “substantial increase in investment” by the water utilities across the four pillars, with biodiversity showing the biggest positive change. Investing in biodiversity net gain, natural capital assessments, and habitat restoration were largely driven by the introduction of a biodiversity performance commitment by the industry regulator.
Two companies scored below the baseline, primarily due to their poor pollution performance “and a lack of ambition compared to their peers” on climate adaptation and biodiversity.
The engagement exercise was conducted by Royal London Asset Management in collaboration with UK-based asset owners including Border to Coast Pension Partnership, Brunel Pension Partnership, Pension Insurance Corporation, and Pension Protection Fund.
“While the sector is broadly moving in the right direction, the pace and consistency of change must accelerate to meet the scale of the challenges ahead,” the report said.
According to the latest State of Global Water Resources report, published in September by the World Meteorological Organization, only about one-third of the global river basins had “normal” conditions in 2024, as a result of “increasingly erratic and extreme” water cycle.
