New push on water scarcity accounting

By Jonathan Birchall in New York
Published: February 27 2009 18:18

Calpers, the California public employees pension fund, has called for US corporations to improve their reporting of the business risks posed by climate change-related water-scarcity.
Anne Stausboll, the recently-appointed chief executive of Calpers, on Thursday welcomed a new report that calls on companies to measure their water “footprint” in the way that some are now meauring their greenhouse gas impact, and to take steps to address and measure potential risks.
“Some companies are becoming transparent about reporting on water, but the marjority are not reporting on water risk,” she said. “We think this report is a really important step in highlighting” the issue.
The report, produced by the Pacific Institute and funded by Ceres, a group backed by investor and environmental groups, argues that many companies, from energy producers to clothing and computer brans, are failing to account for their dependence on raw materials whose costs can be affected by water shortages and political decisions.
It cites the example of Dell and Hewlett-Packard, which it says fail to acknowlege their exposure to water risk in regulatory filings, despite the heavy consumption of water in the manufacturing of semi-conductors.
In the garment industry, it argues that no companies are properly assessing the dependence of cotton production on heavy use of irrigation, and highlights the costto water suppliers posed by the recent boom in the exploitation of Canadian tar sands.
Several Wall Street research firms have also issued reports in recent months highlighting water risk, with a JP Morgan analyst saying in March last yeat that “these risks are difficult for investors to assess, due both to poor information about the underlying supply conditions and to fragmentary or inadequate reporting by individual companies.”
In an indication fo the growing mainstream acceptance of the need for companies to acknowlege the material risks posed by climate change, the National Association of Insurance Commissioners - which represents state regulators - will next month consider requiring insurance companies to assess and report climate change risk.
A group of investors convened by Ceres also petitioned the SEC 18 months ago to to require all publicly-traded companies to disclose their financial risks from climate change.
Mindy Lubber, head of Ceres, said the group was optimistic that the SEC, under the new Obama adimistration, would make climate risk reporting mandatory.
“These are real risks that the SEC ought to requiring companies to disclosee, and that’s the information investors should be requiiring when they make decisions.
Ms Stausboll at Calpers argued that the current financial crisis would not lead to an easing of pressure on companies on climate change risk.
“My view is that coming out of this global crisis, business and investors will be looking at risk in a new risk in a whole new way...I believe that sustainability issues and these global risk issues will be part of that discussion.”
Copyright The Financial Times Limited 2009