Nieuw project gestart: BRIDGE – Water risks and institutional investors: novel approaches to bridge ESG data gaps
Existing frameworks designed for institutional investors to assess Environmental, Social and Governance (ESG)-data1 have not yet fully addressed the complexities associated with water. These frameworks, whether focused on reporting or rating, have encountered challenges in adequately understanding water-related aspects. Issues such as water stress, handling spatial and temporal variability, limited consideration of response strategies, missed opportunities, strategic value, and a narrow scope and context approach have hindered the effective interpretation of water data. Consequently, it has become difficult to prioritize the right issues within the value chain (materiality) and make meaningful comparisons among companies in terms of their water performance. Nevertheless, efforts are underway to bridge these gaps and to enhance the evaluation of water-related ESG factors. A growing push towards context in recent years, along with greater data, holds promise for stronger performance assessments in relation to water and ESG concerns (A. Morgan et al., 2022)2.
This study will bring a new perspective against the traditional ESG data approaches, by combining current and future basin water risks with water-related performance of companies and balancing the outputs from the analysis on expected basin risks and company responses.
It will introduce a new approach by focusing on geographies and supply chain to map water risks and seek engagement with investees. By applying more location-specific tools and conducting a systems analysis of cascading risks, it aims to bridge the gap between location-specific risks and portfolio-wide risks. In parallel it also aims to provide a translation of water risks into finance-language, so these risks can be taken into account in corporate reporting in an appropriate way.
Overall, the project is encouraging a shift in how investors understand and consider water related risks.