5 Years On – Have We Made A Difference?

By Debra Tan 15 December, 2016

CWR just turned 5! Tan reflects on our work so far. Have we made a difference? What next for the coming 5 years?

It is that time of the year again and even Beijing cafes are playing Christmas carols. I am staring out at blue skies; but only a few days ago PM2.5 index was at around 500. What a difference a few days can make.

I am in Beijing for the 4^th China SIF which following the G20 in Hangzhou, continues to push the financial sector to contribute towards environmentally friendly economic development. Ma Jun, a strong advocate of Green Finance in China and the PBOC’s Chief Economist opened the forum titled “Catching the Green Finance Water: the Role of Investors”.
China Water Risk was invited to co-host and moderate a breakout session on “Quantifying & Managing ESG Risks”. ISEAL Alliance and Global Infrastructure Basel extoled the use of international standards in managing risk and on the quantifying side, ICBC expanded on its environmental stress testing, CECEP Consulting (a state-owned consultancy) demonstrated its Environmental Benefit Analysis tool while we showcased our recent water risk valuation report.
I came out of the day-long forum feeling bullish – we are one step closer to embedding water/environmental risk into financial valuation and credit assessments. Sure there were challenges, but there was no doubt that China was leading the charge towards this and an era of green finance.

Directional differences in China & US but how about CWR? Have we made a difference?

The 13FYP on Environmental Protection released the day before China SIF with more comprehensive and stringent targets also helped bolster sentiment. More good news on the day following the forum, with the State Council approving the Amendments to the Environmental Law to incorporate the Water Ten. These are strong signals of a fundamental change within China and its commitment to build a green and “ecological civilization”. What a difference a few days can make.
Meanwhile on the other side of the Pacific, the course is also being set: Scott Pruitt to lead the EPA and ExxonMobil CEO Rex Tillerson is the leading candidate for the secretary of state. What a difference.
With these two countries heading in what appears to be opposite directions, I find myself reflecting on China Water Risk’s own journey, has it made a difference? What’s in store for the future?

Water risk “has become the new norm. I would like to think that CWR played a part in that”

China Water Risk (CWR) turned five years old this year and I am often asked how I view the last five years and how I see the next five. At the risk of beginning to sound rather like a five year plan, the last five years of CWR can be viewed as “the raising awareness phase” – not just about water risk by sector but also the trade-offs between each sector, in particular vis-à-vis the base requirement of food and energy security.
When we started in 2011, many were skeptical about the existence of the risk. Now I no longer have to “sell” water risk – it has become the new norm. I would like to think that CWR played a part in that.

We are a team of seven working with partners from MEPFECO, CAS, WRI, IRENA to various financial institutions

We have come far. At the start, there were concerns over the name “China Water Risk” – is it too racy/ too risky? Perhaps, but the name helped differentiate us as we do not focus on traditional water issues of sanitation &health (WASH). Today, we are a team of seven working with partners from MEPFECO, CAS, WRI, IRENA to various financial institutions, amongst others.

The water-energy-climate nexus is an important area of work for us. Power needs water to generate and in turn clean water needs power.  However, water is the resource most vulnerable to climate change and adding the wrong energy mix, affects both climate change and water resources.  Balancing trade-offs here at this nexus is crucial, especially in China which needs more power but has limited water resources. This is why renewables is compelling as they can save both carbon and water.

Balancing trade-offs at the water-energy-climate nexus is crucial

To place water as a financial risk, we started writing commissioned research in the energy sector for financial institutions in 2012 & 2013. By 2014, SIWI invited us to participate in the Stockholm Water Prize Seminar on Water & Energy. In 2015, we published our own report, a 200 page tome “Towards A Water & Energy Secure China”. This was indeed a landmark report for us and we are pleased to say it was included as a publication on the IWRA website.

Textiles is the most targeted sector in Water Ten. Can it survive? Or does its business model need to change?

In the same year, the fashion industry also recognised our work in Water & Fashion nominated CWR as a finalist for the 2015 GLASA award. Textiles & Fashion is also an important conversation for us as the sector is one of the most polluting sectors in China. Not surprisingly, it is also the most targeted sector in China’s Water Ten Plan and we find ourselves asking “Is There Room for Fast Fashion in a Beautiful China?”

CWR’s journey in food security & safety has explored food vs energy & tap vs bottled water

Clearly pollution exacerbates water scarcity. Pollution also brings about food safety issues and contaminates precious drinking water sources. CWR’s journey here has been from food security & safety to trade-offs between agriculture vs energy as well as tap vs bottled water …

“Water-nomics” is an attempt to marry economic planning with water resource management

Ultimately, it boils down to the holistic management of water resources. To this end, we started the conversation in “water-nomics” in an attempt to marry economic planning with water resource management. This is important not just for China but other developing countries and important lessons can be learnt from developed countries within the G20.

Within China, we worked with MEP-FECO to illustrate this along China’s most important waterway, the Yangtze River – if you missed this, do check out “Water-nomics of the Yangtze River Economic Belt – Strategies & recommendations for green development along the river”. Decisions made along this river will not only impact China but global trade.

5 reports & 1 academic article published in 2016…

… close to 50 events fielded by team & 70+ investors interviewed for valuation report

The last five years have been indeed been busy and 2016 has been no different. This year, CWR published/ jointly published 5 reports and had one academic article published in “Environmental Protection” (Issue 15, 2016), a national academic journal of China. Each of these were trailblazing in their own way – access these reports here.
There were also events & outreach… I myself started the year on a pollution panel at the UBS China conference and ended the year with the 4th China SIF. Meanwhile, the team fielded close to 50 events/ keynotes, seminars and workshops in between (and this did not include the close to 70+ investors we interviewed for the valuation report).

Conversations started have led to action – Rare Earths in China tabled as an emerging issue by the PRI

We are proud of the complex conversations we started. The most recent, Rare Earths in China have already been tabled by the PRI as an emerging issue alongside Cybersecurity & Antibiotics at the PRI in Persons in Singapore this year. To kick-start a conversation on the policy side, especially regarding the global black market, we have also just completed a speaking tour at top US policy think tanks and universities in November 2016.
There has also been positive feedback on our joint publications: The brief with IRENA was used in the Clean Energy Ministerial (CEM) 7 Preparatory meetings as well as IRENA Members Council and most recently, the 12^th Council IRENA Meeting in November 2016. We have also just heard that the CWR-MEPFECO policy brief on Water-nomics of the Yangtze River has been selected by the International Scientific Committee for oral presentation at the XVI World Water Congress in 2017.

Deep thanks to our partners. We would not be here without you

To say that I am proud of the CWR team for their dedication and their great work is an understatement. CWR would not be here today without your hard work. I am also thankful to all our partners and those who helped us along the way. We would also not be here without you.
As for the next five years, here is my wish list…

• Wish we can quantify and embed water risk into portfolio valuation (credit or equity) across sectors;
• Wish to change the fashion business model from dirty to clean and fast to circular before production is moved to another country with lax environmental regulations;
• Wish we can make sound decisions today for water tomorrow: adopt a holistic mountains-to-oceans approach – this does not only apply to policy makers but also Asian tycoons, captains of industry and business leaders;
• Wish that we would do away with built-in obsolesce and waste – designers need to consider the environment & the reality of limited resources and start designing with a longer life-cycle and less waste in mind; and
• Wish we rid the ocean of plastics and ween ourselves off plastic, as it is, China’s bottled water habit already produces plastics that result in building one Jinmao Tower per annum.

The list is exhaustive but I will stop here.

CWR’s website to be revamped next year

We will revamp the website next year as CWR continues to strive towards these goals. Will we get there in 5 years? It’s a mystery, but we do know we cannot do this alone. Join CWR on these conversations and if you would like to work with us on any of these threads, please do contact us!
Finally, it is not just water, management of forests is also important for watersheds – policies matter and borders can make a difference. Maybe this Christmas, press pause; see the woods from the trees. We can also make a difference with our choices from food to goods.

It is high time global brands & consumers started acting responsibly

Given the current diametrically opposed global views climate change, Asia needs to step up their game, and China must continue to lead. Oh, and one last wish … before we step into a trade war… CWR wishes the rest of the world using “Made in China” products be it clothes, batteries or electronics can appreciate that these cheap goods enjoyed have been at the expense of China’s environment and ultimately the health of the Chinese: it is high time global brands & consumers started acting responsibly.

Further Reading

• Can APAC Lead In Adaptation Finance? – After attending two key climate conferences, including COP 22, CWR’s Hu shares why adaptation financing in APAC is crucial though it’s lagging and how the private sector can lead this effort
• Buying Electronics Can Pollute Our Future – This Christmas Hongqiao Liu wants you to think twice before buying that new electronic device as key rare earths & other critical raw materials are causing pollution in China. Companies also need to act & cut out built-in-obsolescence
• Dear Santa, Less Stuff Please – This Christmas China Water Risk’s Dawn McGregor draws attention to the trails of waste left by our gifts, made worse with low-recycling rates & increasing e-commerce orders. She wants less stuff but that doesn’t mean no presents
• Water In: Beer, Crisps & Chocolate – Food & drink help create a festive atmosphere in Christmas but how much water do they use? China Water Risk’s Woody Chan looks into the water footprints of beer, chocolate & crisps, the impact on China & potential solutions
• Playing With Trees At Christmas – Trees can play a key role in protecting water.  With this is mind China Water Risk’s Hubert Thieriot tests out a new ‘toy’, the World Resources Institutue’s Global Forest Watch map, on China. See what he finds

• Vanishing Ice: Asia Running Dry – The Hindu-Kush Himalayan region plays a vital role in Asia’s water future. It is a source of 10 major rivers which feed 16 countries. After a month in the Himalayas, CWR’s Tan shares her worries over the vanishing glaciers & the lack of cohesive action to tackle real threats