Business & Education News - October 6, 2004

The business risks of water scarcity

Commercial and development banks can exert considerable influence on companies operating in water-scarce regions, according to the preliminary findings of a joint United Nations Environment Programme Finance Initiative (UNEP-FI) and Stockholm International Water Institute (SIWI) project.

In far too many localities, water infrastructure is lacking, and hence water resources have become so depleted, polluted, or inaccessible that not enough water is available to meet skyrocketing demands from businesses and households, according to the draft released in August at World Water Week in Stockholm.

The trend is worrisome, especially in developing countries, adds Peter Gleick of the Pacific Institute, a nonprofit think tank that released its own report in August, Water Scarcity Poses Threat to Global Business. Local protestors in Rajasthan, India, for example, are calling for the shutdown of a Coca-Cola bottling plant because water levels are declining, Gleick says (Environ. Sci. Technol. 2003, 37, 387A).

The UNEP–SIWI collaborative report marks a growing concern within the international community that financial institutions, and businesses in general, need to learn more about the social aspects of water scarcity, including political conflicts over shared waters, local disputes between companies and citizens, and insufficient regulatory structure, says Johan Kuylenstierna, project director of the Swedish Water House, a sponsor of the UNEP–SIWI report.

“The issue of water scarcity is not considered by financial institutions to any great extent,” Kuylenstierna says, not even by groups currently active in countries facing water-related constraints. But if the lender calls for more careful consideration of water scarcity before granting a loan, the company operating in a water-stressed area is likely to respond, the report asserts.

However, some analysts working in infrastructure financing in the United States say they routinely deal with water scarcity. “If there is a doubt about water, then it becomes part of the loan negotiations,” one financier says. The project’s preliminary findings don’t reflect a good understanding of financial institutions, he adds.

Risks of Water Scarcity: A Business Case for Financial Institutions, issued by UNEP-FI and SIWI, can be viewed at www.siwi.org/press/presrel_04_Finance%20Initiative.htm —CATHERINE M. COONEY