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Global drought leads to investors pressuring companies to better manage their water use
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As droughts worsen across the world, investors are turning up the heat on companies wasting water and trying to pick winners from a sparse crowd of specialist listed companies looking to address the problem.
From Kenya to California and nearly half of Europe, a shortage of fresh water has grabbed the attention of policymakers and given millions of citizens a fresh window into the stressed state of the planet.
Against that backdrop, a group of investors managing nearly $10 trillion on August 16 said they planned to step up efforts to pressure boards to better manage the critical resource and could vote against directors of laggard firms.
The vested interest in doing so is clear: analysis from environmental disclosure platform CDP and Planet Tracker in May showed listed companies could face losses of at least $225 billion from risks related to water.
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"These are no longer far-off events; they are happening right now," said Dexter Galvin, CDP’s global director of corporations and supply chains.
Last week, for example, Toyota suspended production at a plant in China's Sichuan province amid a drought-induced power shortage.
Awareness of how fraught the situation is – with 2.3 billion people currently living in water-stressed countries, according to the United Nations – has led a number of asset managers to launch equity funds to tap growing interest among investors to help find a solution.