Pacific Institute

Water scarcity & climate change: Growing risks for businesses & investors

Water is crucial for the economy. Virtually every industry from agriculture, electric power and industrial manufacturing to beverage, apparel, and tourism relies on it to grow and ultimately sustain their business.

Yet water is becoming scarcer globally and every indication is that it will become even more so in the future. Decreasing availability, declining quality, and growing demand for water are creating significant challenges to businesses and investors who have traditionally taken clean, reliable and inexpensive water for granted. These problems are already causing decreases in companies' water allotments, shifts toward full-cost water pricing, more stringent water quality regulations, growing community opposition, and increased public scrutiny of corporate water practices.

This Ceres\Pacific Institute report concludes that climate change will exacerbate these water risks, especially as the world population grows by 50 million a year.

The most recent report by the Intergovernmental Panel on Climate Change (IPCC) states that global warming will lead to 'changes in all components of the freshwater systems,' and concludes that 'water and its availability and quality will be main pressures on, and issues for, societies and the environment under climate change.' 2 Nestlé’s chairman Peter Brabeck- Letmathe puts it more bluntly, calling water availability a bigger challenge than energy security. “I am convinced that, under present conditions and with the way water is being managed, we will run out of water long before we run out of fuel.”3

Already, China and India are seeing growth limited by reduced water supplies from depleted groundwater and shrinking glaciers that sustain key rivers. California is limiting agricultural water withdrawals due to drought. France, Germany and Spain were forced to shut down dozens of nuclear plants due to a prolonged heat wave and low water levels. Scientists say climate change was a contributing factor to all of these events, which had far-reaching business impacts.

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