Norway Sovereign Wealth Fund Says Water Risks May Affect Returns

Norway’s $808 billion sovereign wealth fund, the world’s largest, said today that long-term returns may be impacted should the companies it invests in fail to adequately manage and mitigate water-related risks.

Norges Bank Investment Management is exposed to water-related risks through investments in about 7,500 companies, it said today. It has investments in water-intensive industries including food and beverages as well as oil, gas and chemicals, NBIM said in a statement. These all rely on water in their operations and supply chain.

The institution supports the Carbon Disclosure Project’s Water Programme that today published a report on water-related risk management to help investors learn how to identify and curb water challenges. Almost two-thirds of the businesses said water-related issues will impact them within five years.

Each company in the sample faces an average of seven water-related risks, with 70 percent stating that water presents substantive challenges to their business. Half have already experienced detrimental business impacts in the past five years.

The report found that water poses “substantial risk” to companies and threatens profits, CDP said in a statement on its website. It said instead of focusing just on water use, companies need to curb water risk across their value chain.

“While the framework for water stewardship is being solidified and many companies remain at the beginning of the journey, some are moving from managing water risk within their direct operations to evaluating and, in some cases, mitigating water risk across their value chain,” Will Sarni, director and practice leader, enterprise water strategy for Deloitte Consulting LLP, said in the statement.

“For those companies mitigating water risk across their value chain, engaging in collective action programs and taking responsibility for externalities such as access to clean water, sanitation and hygiene, leadership is within reach, if not already achieved.”

To contact the reporter on this story: Louise Downing in London at ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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