By Deepshikha SINGH, Deputy Head of La Française Sustainable Investment Research

28 mars 2022

Water is the ultimate renewable resource – yet it is scarce, and has been burdened with our overconsumption, pollution, and the effects of climate change. Global water use has more than doubled in the last 40 years. It is estimated that we will need 50% more food (and 40% more freshwater) by 2030. According to the UN, 45% of the global gross domestic product (GDP), 52% of the world’s population and 40% of global grain production is expected to be at risk due to water stress by 2050 if business-as-usual persists. Companies are already experiencing financially-material stresses related to water scarcity and the associated degradation of ecosystems.

Groundwater – our main freshwater resource is scarce and fast depleting

22nd March was celebrated as the World Water Day and the theme of this year was ‘Groundwater – making the invisible visible’. Our Blue Planet is named for the abundance of the blue liquid on its surface, yet less than 1% of it is usable is its natural form. For most of our uses – domestic and industrial – we pump water from under the ground. Groundwater is the most abundant form in which freshwater can be used, but it is fast disappearing. We are pumping non-renewable groundwater reserves at unsustainable rates to counter droughts across the world without even knowing how much we have left.

As data from NASA suggests, globally, one-third of our largest groundwater basins are under distress – being rapidly depleted by human consumption. In US alone, almost half of the water supply needs are met by pumping from underground aquifers. Add to these, the enormous amounts of pumping that is done by bottling companies, other industries and the groundwater reserves have been depleted beyond repair. NASA estimates that the likelihood of mega droughts (lasting more than 30 years) in US Southwest and Central plains is going to increase to 60%, even if we achieve net zero by 2050 (which the IPCC’s latest reports claim we will not).

Industries face multiple forms of risk from the growing water scarcity

Industries and agriculture use 90% of global freshwater resources – with agriculture accounting for the lion’s share. Global water demand (in terms of water withdrawals) is projected to increase by 30% by 2050 (despite the increasing scarcity), mainly due to increasing demand from manufacturing and electricity sectors (OECD). A growing and increasingly wealthy global population needs more food, materials and energy – placing intense pressure on water resources. Water-related risks, from physical to reputational, can potentially damage companies’ financial performance.

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