Water Risk: As Scarcity Intensifies, Broad Swath of Companies, Sectors Face Challenges
Extreme heat and drought associated with climate change are intensifying water scarcity worldwide at an unprecedented pace across sectors, asset classes and regions, with demand for fresh water expected to outpace supply by 40% in five years. In real estate alone, 60% of global REITs could be operating in areas of high water stress by 2030. By 2050, $70 trillion of global GDP may be exposed to high water stress, up fivefold since 2010, according to the World Resources Institute.
Businesses must adapt or face financial consequences, with agriculture, textiles, food, beverages, chemicals and oil and gas especially at risk. Nestle is investing over $1 billion in sustainable agriculture, and McDonald’s is expanding its chicken offerings as drought pinches cattle production. Meanwhile, apparel makers are pursuing alternatives to water-intensive cotton.
Key Research Takeaways
- A Variety of Costs: Water scarcity can halt production, require investment and lead to impairments. Constellation Brands took a $660 million writedown as it abandoned a Mexico brewery project. In Chile, a $200 million Google data center’s approval was partly reversed and Antofagasta had to spend $1.5 billion last year to increase seawater use at a mine.
- Financing Risks Climb: Bank of America and Wells Fargo finance the some of the highest water consumption and water risk exposure, according to our analysis of league table data in water-intensive industries. This applies the concept of tracking CO2 emissions financing, which has received more attention than water, to assess risks that lenders may not report.
- Tapping Opportunities, Solutions: Revenue is likely to rise for companies that provide solutions, like Veolia, Xylem, Ecolab and Lenovo. By some estimates, the desalination market alone could double to $50 billion by 2032.
- Slow Progress on Reducing Use: Though 65% of our peer group have set water-reduction goals, just a third are on track to meet or have hit their targets.
- Investor Interest Increases: The number of water-focused funds rose to 184 last year from 137 in 2020, while assets climbed about 60% to nearly $94 billion.
This is a synopsis of the full report. The data included in these materials are for illustrative purposes only. The BLOOMBERG TERMINAL service and Bloomberg data products (the “Services”) are owned and distributed by Bloomberg Finance L.P. (“BFLP”) except (i) in Argentina, Australia and certain jurisdictions in the Pacific Islands, Bermuda, China, India, Japan, Korea and New Zealand, where Bloomberg L.P. and its subsidiaries (“BLP”) distribute these products, and (ii) in Singapore and the jurisdictions serviced by Bloomberg’s Singapore office, where a subsidiary of BFLP distributes these products. BLP provides BFLP and its subsidiaries with global marketing and operational support and service. Certain features, functions, products and services are available only to sophisticated investors and only where permitted. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or other information in the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP, BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to “buy”, “sell” or “hold” an investment. Information available via the Services should not be considered as information sufficient upon which to base an investment decision. The following are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG ANYWHERE, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL, BLOOMBERG TERMINAL and BLOOMBERG.COM. Absence of any trademark or service mark from this list does not waive Bloomberg’s intellectual property rights in that name, mark or logo. All rights reserved. © 2025 Bloomberg.