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


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


By Simon Jessop and Tommy Wilkes

LONDON (Reuters) – Monetary establishments face losses of at the very 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 danger, by way of flood, drought or air pollution, is ready to change into a rising situation for corporations over the subsequent decade.

The most typical impacts flagged to CDP, whose information is used to tell funding selections by monetary corporations managing greater than $130 trillion in belongings, included diminished manufacturing, elevated prices and decrease revenues.

In its first such evaluation, CDP and non-profit Planet Tracker analysed submissions to a survey on water safety from 1,112 corporations, through which 69% flagged a danger 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 related dangers, which might embody fines and different liabilities, shareholder lawsuits or an lack of ability to get insurance coverage.

By underestimating the chance, banks, buyers and insurers could possibly be allocating an excessive amount of capital to corporations and tasks that will in the end show uneconomic, resulting in the belongings turning into “stranded” and the funding or lending written off.

“Monetary establishments want to know how uncovered they’re to those dangers and take speedy steps earlier than it’s too late,” mentioned Cate Lamb, CDP’s international 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 corporations on this planet can be greater.

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 steel and mining sectors.

CDP and Planet Tracker additionally recognized the state and public establishments most carefully linked to 42 of the world’s most water-impacted corporations, by way 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 corporations even have round $327 billion of financing attributable to mature over the subsequent 5 years.