These 5 banks value water
The finance sector has the power to demonstrate the value of water, and to drive investment into its sustainable management. Here are some of the ways this is beginning to happen
We all value water in our own ways, whether it’s a cool drink or a cultural tradition, but water also has monetary value. This is something financial institutions can leverage with the goal of protecting water as a resource. The OECD estimated in 2017 that an investment of around $1 trillion into water infrastructure will be needed each year to secure water for all. We’re not there yet. With their financial power, what are banks doing to bring investment and change to water management? Here are 5 examples.
1. ING – communicating the risk of investing in climate damaging industries
Risk modelling is an analytical process undertaken by banks to assess the risks and benefits of investments for themselves and their clients.
ING Group, a Dutch multinational bank, has stated that “…gaining a better understanding of the impact of climate on our business will make us more resilient and prepared to deal with it, in turn leaving us in a better position to keep helping our clients.” To this end, they have developed a risk modelling approach to understand where climate change and its effects – including on water systems – pose threats to investments.
By addressing climate change as a financial risk, ING are demonstrating that there is an economic, as well as moral, imperative to protect the environment. For example, identifying ‘stranded assets’, carbon-intensive assets that will become unusable or unprofitable through the move to ‘greener’ industries, might encourage investors to move money away from more harmful industries.
2. Barclays – investing in water-friendly start-ups and entrepreneurs
Banks can use their financial power to invest in innovators. In 2016, UK bank Barclays partnered with Unreasonable Group to create Unreasonable Impact, an early investment platform to support entrepreneurs building climate-friendly businesses. To secure investment, companies must be for-profit and working to solve environmental challenges.
One funded company, Singapore-based Shiok Meats, is experimenting with lab-grown seafood. They hope that by recreating the flavours and textures of seafood such as shrimp in the lab, they can ease pressures on the oceans by providing an alternative food source.
It is important to the bank that these are profitable companies, as they’ll show the financial value of water preservation, and offer a return to the ban.
3. Credit Suisse – creating funds that push for better water management
Credit Suisse is another bank putting its money where its mouth is. The Swiss bank partnered with Rockefeller Asset Management at the end of 2020 to launch the first impact fund to address ocean health. This fund was developed in response to the UN’s Sustainable Development Goal 14, ‘Life Below Water’ and has now raised $212 million.
The fund is made up companies that address the challenges facing the world’s oceans, from pollution to overfishing, and fit into one or more of three key themes:
- Pollution Prevention
- Carbon Transition
- Ocean Conservation
Investors in the fund can influence the decision-making of funded companies to ensure good, sustainable practices are in place and being adhered to, with additional expertise sought from The Ocean Foundation.
4. BNP Paribas asset management – holding banks to account
BNP Paribas is a French international banking group. This World Water Day, they shared an infographic highlighting not just the value of water, but the opportunities it presents to investors (https://investors-corner.bnpparibas-am.com/investing/world-water-day-an-opportunity-also-for-investors-infographic/). By identifying attractive investment opportunities that also support good water management, BNP Paribas can help drive finance into water positive companies. This, in turn, can encourage companies to better manage water in order to attract investment.
BNP Paribas have made their commitment to more sustainable investments public and their strategy free to view online. This is an encouraging step towards accountability. Their focus is on three Es:
- An Energy transition to a low carbon economy
- Environmental sustainability
- Equality and inclusive growth.
5. BBVA – partnering with water charities to support local projects
Banks can also use their financial and business knowledge to build partnerships with charities and non-profits. BBVA is a Spanish financial services company that also runs Financiera Confianza, a microfinance foundation which offers financial services, training and advice to people who live in vulnerable conditions in Latin America.
Since 2017, Financiera Confianza has worked with Water.org, a global non-profit working to make clean water accessible to everyone. The partnership works in Peru, where it has created WaterCredit, microloans for local people to fund water management and sanitation systems. By World Water Day 2021, the partnership has provided more than 30,000 microloans to support nearly 90,000 people in areas of poor water access.
Banks can show the financial value of water
With its financial power, the banking sector is a vital ally in bringing improvements to water management. While there is some way to go, more banking institutions are recognising their role in investing in the future of water, and divesting from industries that threaten it. It’s a calculated move, one that will offer financial benefits in the long run. But the wider impact is not only water preservation, but the very public statement on the value of water.
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