Upgraded Water Risk Filter: From Assessment To Response

By Ariane Laporte-Bisquit 15 November, 2018

WWF's Laporte-Bisquit details their revamped tool to help co's & investors better assess water risks

China’s booming economic growth has put immense pressure on its scarce, unequally distributed and heavily polluted water resources. Wen Jiabao, a former Prime Minister, warned that water problems “threaten the very survival of the Chinese nation” . However with today’s fast-paced industrialisation and urbanisation, the country’s water demand keeps on growing and its water supply keeps on being over-used and polluted, leading to a daunting gap in demand vs supply.

Co’s are likely to face greater regulatory & reputational risks due to stronger water-related regulations & increased enforcement

Future business growth and economic development in China could be dampened by water risk if companies do not begin to assess and respond to it. Not only are water-related physical risks (e.g. water scarcity, droughts, pollution) a major threat to Chinese business viability, but companies are also likely to face greater regulatory and reputational risks due to stronger water-related regulations and increased enforcement as well as rising community concerns. Given that many multinational companies have supply chains based in China, water risks in China can no longer be ignored by global brands and must be assessed and acted upon. Indeed, WWF has seen growing interest to tackle water risk in China from beverage sector companies like Coca-Cola to apparel sector companies like H&M.

On 31^st October 2018, WWF launched the upgraded Water Risk Filter 5.0, which helps companies better explore and assess their water risks, and will soon enable them to better response to these risks.

Given that many MNC’s have supply chains based in China, water risks there can no longer be ignored

Exploring water risks with unique combination of best available data & country profile information

With 32 basin risk indicators and more than 12 high resolution country data sets, the Water Risk Filter’s maps section offers an array of data risks layers and at different scales from global to local. It also contains the new ability to overlay water risk layers with other aspects (e.g. population density, land cover, cropland, wetlands, and more) to explore linkages and have a better contextual overview of water challenges.

For example, overlaying the Water Depletion risk indicator and the new additional Cropland Areas layer, highlights one of the major water challenges in China: a majority of the country’s agricultural activities are in the Northeast despite it being a water scarce region.

Overlaying the Water Depletion risk indicator & the new Cropland Areas layer highlights one of the major water challenges in China

Users can also explore over 140 country profiles containing detailed information on national water governance and policies, including China’s evolving regulatory landscape with more stringent regulations, enforced with strengthened environmental law. A new feature was included to allow comparison between different countries basin risk scores and how they rank in relation to others. With a high overall reputational risk score (3.48), China ranks in the top 25 countries for reputational risks exposure.

Assessing water risk is easier & faster now with state-of-the-art data

From Chinese companies wanting to assess water risks in their operations to multinationals aiming to address water risks across their supply chains, it is critical to understand both basin and operational water risk.

With version 5.0 of the Water Risk Filter, the scope of the underlying data sets was expanded from 20 to 32 basin risk indicators for a more accurate basin risk assessment. The operational risk assessment was also modified to make it easier, faster, and more relevant than ever before. Recognising that the existing assessment could be time consuming, users can now opt to either conduct a rapid operational risk assessment (10 quick drop-down questions, applied to all sites), or a more detailed assessment (45 questions, applied site-by-site) depending on their needs.

The upgraded Water Risk Filter now contains climate change projection data for droughts, floods & water discharge

Moreover, the quality of water data for conducting basin risk assessment is ever improving. The upgraded Water Risk Filter now contains climate change projection data for droughts, floods and water discharge developed jointly with the Potsdam Institute for Climate Impact Research. By partnering with RepRisk and GlobeScan, additional data was included to highlight the potential for conflict and lack of corporate trust to influence reputational risk.

Going beyond assessment to responding to water risks

Perhaps the most exciting aspect of the tool is what will soon go live in early 2019. The upcoming Respond section will dynamically link the water risk assessment results for any given site (or a portfolio of sites) to provide a customised set of mitigation response actions.

The upcoming Respond section will dynamically link assessment results to provide a customised set of mitigation responses

The recommended response actions are aligned to leading water stewardship frameworks (e.g. Alliance for Water Stewardship, Ceres Aqua Gauge, CDP Water Security). Moreover, each action is assigned to one of ten categories that are aligned with the categories within the CEO Water Mandate Water Stewardship Toolkit, to allow users to easily access relevant supplementary materials and guidance for each action.

To become a leading water steward, mitigating water risks requires engaging with other basin stakeholders in collective action. The new Respond section will provide guidance to companies on how to start engaging in collective action as well as other categories of actions related to water awareness and internal capacity, strategy and business planning, water governance, and more. While online the Water Risk Filter will offer 50 actions, an additional 100 actions are available for those who are keen to engage with WWF to help tackle water risk.

A final Value section will help enable appropriate approaches to valuing water…

… plus provide a new calculator to estimate value potentially at risk from water events

Lastly, later in 2019, the Water Risk Filter 5.0 will go live with its final section: Value. While a new section that maps GDP facing water risk is already live, soon this section will help to enable appropriate approaches to valuing water, while also providing a new calculator to estimate financial value potentially at risk from water events.

Already a trusted practical online tool used by thousands of companies to assess hundreds of thousands of sites across the globe, the new features of the Water Risk Filter will help companies to progress on their water stewardship journeys – moving from assessment to response on water risks.  For more information or to start using the tool today, click here.

Further Reading 

• Have Investors Incorporated Climate Risks Into Portfolios? – Hear from WWF HK’s Jean-Marc Champagne & Sam Hilton on their new report that introduces climate change & financial risks to institutional investors, focusing APAC & the energy sector
• Dell’s Water Stewardship – Dell is not only reducing water use in its supply chain but also managing water as a shared resource at a watershed level through water stewardship. Find out more from their Jason Ho
• Big Data Accelerates The Expansion Of Green Supply Chains – Check out which brands are leading on green supply chains in China as IPE’s Erin Wong & Helen Ding share results from the 5th CITI report, which also includes a new GHG emissions index
• Belt & Road Initiative Injects Vitality Into Economies – Professor Asit Biswas & Cecilia Tortajada from the National University of Singapore show how China’s Belt & Road Initiative can benefit developing economies in Asia & Africa by promoting connectivity
• APAN Climate Adaptation Forum: 3 Takeaways – As climate adaptation conversations becomes mainstream, the focus is now to accelerate actions. China Water Risk’s Feng Hu shares key takeaways from the Asia Pacific Climate Change Adaptation Forum

• Water Risk Valuation – What Investors Say – See what 70+ investors have to say on different valuation approaches we applied to 10 energy stocks listed across 4 exchanges. Is there consensus? What are they most worried about?
• Quantifying Water Risk: What’s My Number? – Industries are exposed to water risks but financial valuation of such risks remain elusive. China Water Risk’s Thieriot reviews existing quantification tools & methods and highlights gaps that need to be filled to put a number on water risks
• Corporate Bonds Water Credit Risk Tool –  China Water Risk sat down with GCP’s Liesel Van Ast & GIZ’s Simone Dettling, two developers of the Corporate Bonds Water Credit Risk Tool to find out how it helps investors & banks mitigate exposure and impact on the bottom line
• Valuing The True Cost Of Water – Water-related risks can be numerous for any given operational site. Nina Cambadelis & Johann Clere walk us through how Veolia’s tool, “The True Cost of Water” can mitigate risks and show potential economic gains
• WWF’s Stuart Orr on the Water Risk Filter – WWF’s Stuart Orr on the newly launched Water Risk Filter Tool. The tool is free and helps companies & investors assess exposure to water risks in their industry and basins where they operate and invest.
• 2018 World Water Week: Key Takeaways – World Water Week 2018 saw exciting issues discussed from financing nature-based solutions to advancing water stewardship & valuing water. Check out more in our key takeaways from China Water Risk’s Woody Chan & Yuanchao Xu