New Report, Water Management and Stewardship: Benchmarking Corporate Practices
While findings reveal that the state of corporate water disclosure in three major sectors remains limited and disparate, companies that engaged with investors improved their performance
Amsterdam, June 24, 2019 – AP7, the state alternative to the private investment funds offered within the Swedish premium pension system, in collaboration with Sustainalytics, a global leader in ESG and corporate governance research, ratings and analytics, today published a new report titled, Water Management and Stewardship: Benchmarking Corporate Practices. While water issues are an important material risk for investors, the report findings reveal there has been little progress over the past two years on corporate water disclosure.
This latest report is an update to the 2017 benchmarking exercise that examined the state of water risk exposure and stewardship in the food and beverage, garment and mining sectors. Sustainalytics analyzed 299 companies on key aspects of corporate water management and found that while 30 percent of the companies assessed received a better total score compared to 2017, 39 percent had declined. The mining sector displayed the strongest performance overall, however the most progress was in the garment industry. The analysis also uncovered a notable increase in board-level responsibility for water management issues. Conversely, corporate efforts on water intensity had taken a clear turn for the worse.
Despite the overall poor disclosure on water issues, Sustainalytics found that companies that engaged with investors appear to have improved their approach to water risks much more than the wider group. Following the 2017 benchmarking, Sustainalytics on behalf of investors undertook a collaborative two-year engagement with select companies in the three analyzed industries. During the engagement, Sustainalytics learned that more was happening than suggested by public disclosures, with companies’ reporting trailing behind their actual water-related activities. The 2019 assessment subsequently showed that the disclosure gap had diminished among the engaged companies, with 65 percent improving their performance.
“The study shows that the companies in our portfolio with the highest water risks do not prioritize management of fresh water risks. For us, as long-term universal owners, this is a risk to our global portfolio,” said Charlotta Dawidowski Sydstrand, Sustainability Strategist at AP7. “Companies need to step up action on freshwater management as climate change will only aggravate the existing water risks.”
“Our research showed that investor engagement appears to have had a measurable impact on improving water-related disclosure among the targeted companies,” said Tytti Kaasinen, Associate Director of Engagement Services at Sustainalytics. “Ultimately, we believe dialogue can help to benefit companies that face impending risks and give investors reassurance on their investee companies.”
To access the Water Management and Stewardship report, please click here.
The Seventh Swedish National Pension Fund (AP7) is the default alternative in the Swedish premium pension system. AP7 manages approximately 500 billion SEK for more than 4 million retirement savers. AP7 is a universal owner managing a global portfolio comprised mainly of equities and to a smaller extent fixed income instruments. The starting point for AP7’s corporate governance activities is the universally accepted norms and conventions on human rights, labour rights, environmental issues and anti-corruption. With investment in nearly 3,000 companies worldwide, AP7 can act as a broad-based and long-term owner with the entire market’s best interests in mind.