June 02, 2011
World Resources Institute Launches Project to Measure Water Risk
by Robert Kropp
The Aqueduct project compiles locally specific data on water risks to provide companies and
investors with information to manage and reduce exposure.
Yesterday's New York
Times reported on China's $62 billion plan to divert at least six trillion gallons of water
each year from the Yangtze River to cities located hundreds of miles to the north. The South-North
Water Diversion Plan has already resulted in the relocation of hundreds of thousands of people in
Yet the Yangtze River itself is already experiencing severe water
scarcity issues of its own, as the recently launched Aqueduct project of the World Resources Institute (WRI) indicates. WRI describes the
Aqueduct project as "a database and a suite of practical tools that measure, map, and explain
water-related risks facing companies and their investors. The objective of the project is to
provide companies and their investors with the actionable information they need to effectively
manage and reduce their exposure to water risk."
The project has already finished its
analysis of the Yellow River in China, into which the water of the Yangtze will be diverted under
China's plan. The analysis reveals that of the ten access and growth constraints, five exceed the
critical threshold, indicating areas of concern for companies and investors.
of the Yangtze River is currently underway, where, as WRI Senior Program Coordinator Rob Kimball
told SocialFunds.com, "Over a billion tons of cargo are transported every year. It's an incredibly
important shipping corridor, but water levels are so low in certain parts of the river that it's
impassable. The entire supply chain is being disrupted."
As evidenced by such recently
launched high-profile initiatives as CDP Water
Disclosure, water scarcity is rapidly becoming a significant issue for businesses. Driven by
such factors as climate change and population growth, water scarcity threatens to disrupt corporate
operations and supply chains as well as add regulatory and reputational risks to those operations.
In the US this year, members of the Interfaith Center on Corporate Responsibility (ICCR) have submitted
at least four shareowner resolutions addressing the human right to water.
SocialFunds.com, "We are going to be encountering these problems more and more all over the world.
But we still talk about water in simplistic terms. We think about having access to water to
operate, but water impacts businesses, people, and the entire economy in complicated ways."
"All the water issues we're encountering are extremely local and extremely complicated," he
continued. "There are numerous factors associated with water-related risks."
hydrological modeling of the physical availability of water as well as an analysis of additional
water-related risks, the project "helps users identify, measure, aggregate and map the water risks
they face in targeted river basins around the world," according to WRI. "Aqueduct's approach
acknowledges the fact that different types of companies, investors, and water users are exposed to
different water risks."
"The heart of the tool is the database, but the exercise itself is
quite productive," Kimball said. "It opens people's eyes to the various forms of water risk."
Aqueduct's analysis of the Yangtze River, for example, reveals that in addition to disruptions
of shipping routes, manufacturers have had to ration their power use due to electricity shortages
of as much as 20%. Because of reduced hydroelectric power production, China may have to burn as
much as an additional one million metric tons of coal per week.
Furthermore, the drought
in China has forced farmers to delay their planting of cotton, leading to an increase in the price
of the commodity in global markets.
"Aqueduct aims to compile locally specific data on the
physical water risks, as well as all the other drivers of water risk, and compile them into
interactive maps of overall risk levels in high-priority river basins," Kimball said. "The aim is
provide information to companies and investors that are trying to manage water risks. They need to
think about them in as complicated terms as they actually exist."
"The key for Aqueduct is
providing multidimensional water risk information," he continued. "We start with the
straightforward physical water risk, and then layer on top of that a number of other indicators.
For example, are other consumers already being efficient? If so, it's going to be difficult to free
up water from them. Are other consumers being productive, generating lots of gross domestic product
(GDP) or high priorities for society such as food or drinking water?"
socioeconomic factors too," Kimball observed. "How concerned is the population with water issues?
These are things that companies have to be aware of, because these companies are inherently
dependant upon water. It they're not looking at all these factors, they're not conducting a
complete risk analysis."
As an outgrowth of the Aqueduct project, WRI is putting together
a Water Risk Alliance which will consist of leading sustainable companies in key water-dependent
industry sectors. The Alliance will provide strategic advice on the establishment of indicators and
sector-specific weights, as well as informational and financial support.
As for the
Aqueduct project itself, "We're working right now on the Colorado River, and we plan on expanding
this year into Australia and Southern Africa," Kimball said. "The objective over the three-year
life of the project is to map in great detail ten high-priority river basins around the world."