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UT researchers develop framework to assess water sustainability in investors’ decision-making

How do large investors rate when it comes to water sustainability? Researchers of the University of Twente have developed and applied a framework to assess policies of investors regarding their incorporation of water sustainability criteria. A Dutch case study shows there’s still a long way to go. Findings of the research have been published in the Journal of Cleaner Production* recently.

Importance of water sustainability

The World Economic Forum consistently ranks water crises in the top-three of systemic risks posed to the global economy in terms of impact. Investors can play a major role in tackling those risks, as their investment decisions have a large impact on the state and shape of tomorrow's water resources. 

“Investments today in new or updated arms, firms and factories will have ramifications for future water resource use and pollution”, Rick Hogeboom, lead researcher of the project and a PhD candidate at the University of Twente, states. “Failure by investors to transition from business-as-usual to more sustainable water practices implies water resources will continue to be further depleted, polluted and needlessly wasted, while prolonged inconsideration of sharing water resources fairly among users increases the likelihood of conflicts.”

Assessment framework

The framework consists of nine indicators in five categories (see figure) which collectively cover criteria relevant to water use and pollution associated with prospective investments.

Water Footprint Assessment Framework

  • Policy Disclosure assesses the transparency of an investor regarding sustainability issues in its investment policy in general and water sustainability specifically.
  • Water Accounting covers the quantification (measuring and monitoring) of water consumption and pollution, both in direct operations and in the supply chain of the activity created by the proposed investment.
  • Efficient Water Use concerns the efficient use of water resources by the activity emerging from the prospective investment.
  • Environmental Sustainability puts the water use and pollution resulting from an investment in the context of locally available water resources – both at the location(s) of the direct operations and at the locations where supply chain activities will take place.
  • Social Equity covers an investor's awareness of and response to social equity concerns that may result from the water use and pollution that will come along with the activity targeted by the investment

Based on the Water Footprint concept

The assessment framework for investors is based on the Water Footprint concept, a result of the research of dr.ir. Arjen Y. Hoekstra, who is a professor in water management at the University of Twente. This indicator for water management performance has contributed to the fact that more and more companies have become aware of their water use (water footprint), in particular those active in agriculture or agriculture-related industries like food and clothing. In 2008, the Water Footprint Network was founded, aiming at supporting these companies in improvement processes.

Case study: Dutch investors perform poorly

The researchers performed a case study research, in which they assessed twenty large Dutch investment companies: banks, insurance companies and pension funds. The results were alarming: they were found to perform poorly on the main indicators, with the highest ranked investor scoring just below 50 per cent of the maximum score.

Performance of Dutch investors

Hogeboom: “All assessed investors in some form express a willingness to contribute to a more sustainable world by adopting or supporting sustainability guidelines, frameworks or principles. However, in analyzing policy documents to assign scores to water sustainability criteria, it was found that their good intentions did not trickle down to effectuate clear water policy.”

Investors who are interesting to find out how they perform on water sustainability are invited to get in contact with the Water Footprint Network, to learn on best practices and get in contact with professionals who can support in taking the next steps. For more information: www.waterfootprint.org.

*Full details of the publication: Rick J. Hogeboom, Ilja Kamphuis, Arjen Y. Hoekstra, Water sustainability of investors: Development and application of an assessment framework, Journal of Cleaner Production, Volume 202, 2018, Pages 642-648, ISSN 0959-6526, https://doi.org/10.1016/j.jclepro.2018.08.142.

Photo credits: Gijs van Ouwerkerk

Laurens van der Velde
Press relations (available Mon-Fri)