Monday, December 5, 2022

Financial firms face $225 billion in water-related losses, analysis estimates By Reuters


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© Reuters. A person bathes below a damaged water pipeline on a sizzling summer season day in New Delhi, India, Might 2, 2022. REUTERS/Adnan Abidi

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By Simon Jessop and Tommy Wilkes

LONDON (Reuters) – Financial establishments face losses of at the least $225 billion from dangers associated to water, with a 3rd of them doing nothing to evaluate the potential impression, a report by main environmental disclosure platform CDP and Planet Tracker estimates.

The U.N. has warned of a 40% shortfall in provide by 2030 if water consumption and manufacturing patterns don’t change and so-called water threat, by means of flood, drought or air pollution, is about to change into a rising difficulty for firms over the following decade.

The most typical impacts flagged to CDP, whose knowledge is used to tell funding selections by monetary firms managing greater than $130 trillion in property, included decreased manufacturing, elevated prices and decrease revenues.

In its first such analysis, CDP and non-profit Planet Tracker analysed submissions to a survey on water safety from 1,112 firms, in which 69% flagged a threat of a “substantive” impression on their enterprise.

Of the 377 listed monetary establishments reporting to CDP, 33% mentioned weren’t assessing their publicity to the linked dangers, which might embody fines and different liabilities, shareholder lawsuits or an incapability to get insurance coverage.

By underestimating the chance, banks, buyers and insurers might be allocating an excessive amount of capital to firms and initiatives that will in the end show uneconomic, resulting in the property changing into “stranded” and the funding or lending written off.

“Financial establishments want to grasp how uncovered they’re to those dangers and take rapid steps earlier than it’s too late,” mentioned Cate Lamb, CDP’s world director of water safety.

CDP analysed the $225 billion worth in danger from a sub-set of 499 of the biggest corporates to have disclosed a monetary projection of potential associated prices. So the determine for all firms in the world can be increased.

The water disaster is already inflicting billions of {dollars} in losses, CDP mentioned, pointing to associated writedowns throughout the oil and gasoline, electrical utilities, coal and metallic and mining sectors.

CDP and Planet Tracker additionally recognized the state and public establishments most intently linked to 42 of the world’s most water-impacted firms, by means of shareholdings or lending.

They discovered the 20 most uncovered held a mixed $2.7 trillion in fairness and had lent $2.5 trillion over the past decade. The firms even have round $327 billion of financing attributable to mature over the following 5 years.

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