A Resource for Investors by Investors on Water Integration Summary Guide of Key Chapter Elements and Resources Table of Contents Why is the Market Becoming More Water Aware ID: 1040263
Download Presentation The PPT/PDF document "Ceres’ Investor Water Toolkit:" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1. Ceres’ Investor Water Toolkit: A Resource for Investors by Investors on Water IntegrationSummary Guide of Key Chapter Elements and Resources
2. Table of ContentsWhy is the Market Becoming More Water Aware? . . . . . . . 3Ceres’ Investor Water Hub: Overview . . . . . . . 4Investor Water Toolkit: Key Contributors . . . . . . . 5Investor Water Toolkit: Overview . . . . . . . 6 Investor Water Toolkit: Key Sections & Elements . . . . . . . 7 Section 1: Understand Water Risks . . . . . . . 8 Section 2: Establish Priorities . . . . . . . 13 Section 3: Buy/Sell Analysis . . . . . . . 18 Section 4: Portfolio & Asset Class Analysis . . . . . . . 25 Section 5: Engagement . . . . . . . 29For More Information . . . . . . . 32
3. Why is the Market Becoming More Water Aware?3
4. Ceres’ Investor Water Hub: OverviewThe “Hub” is an investor working group dedicated to developing more effective research methods to assess water risks and opportunities. It also offers peer-to-peer sharing of leading ESG and water integration and engagement practices, and a number of sub-groups looking at specific topic areas (e.g. private equity, metrics and tools, etc.)Investor Partners – 90 institutional investors, Engaging Key Stakeholders4Advisory Committee Members
5. Investor Water Toolkit: Key ContributorsACTIAM Agriculture CapitalBMO Global Asset Management Bradesco Securities Breckinridge Capital Advisors Brown Advisory Caisse de dépôt et placement du Québec (CDPQ) Castleton Partners Christian Brothers Investment Services (CBIS) Citi Cumberland Advisors Dana Investment Advisors Domini Impact Investments Encourage Capital Goldman Sachs Asset Management Green Century Capital ManagementImpax Asset ManagementInterfaith Center on Corporate Resp. (ICCR)KBI Global InvestorsMacquarie Infrastructure and Real AssetsMercy Investment ServicesNephila Advisors LLCNorges Bank Investment ManagementRegents, University of CaliforniaOntario Teachers’ Pension PlanPark FoundationPGGM Investments Sustainable Insights Capital ManagementState Street Global AdvisorsThe State Board of Administration of FloridaTIAATreehouse Investments LLCTri-State Coalition for Responsible InvestmentWalden Asset ManagerWater Asset Management5
6. Investor Water Toolkit: Overview6
7. Investor Water Toolkit: Key Sections and ElementsProvides “how-to” guidanceAllows for a decision-making support for mainstream investorsFocus on methods, but not prescriptiveCatalyzes better investor water data, analysis methods and researchShowcases peer case studiesTools: Excel databases, charts, tables, visuals, etc. 7
8. Section 1: Understand Water Risks 8Understand Materiality Dimensions: Impact and Timing of RisksWater Risks are Often Social License to Operate RisksDon’t Overlook the Materiality of Wastewater Management RisksUse Water Risk Dashboard to Assess Water Dependency, Security and ResponseUnderstand Where Water Risks Lie in Value-Chain by IndustryLook Beyond Security Level to Entire Portfolio or Asset ClassInvestors Should be Familiar with The Human Right to Water and Sanitation and Sustainable Development Goal 6 (SDG 6)
9. 9MATERIALITY SPECTRUMIncrease in Costs of Goods Sold - EPS impactsWastewater AccidentsFlooding Loss of Social License to OperateRevenue and GrowthOften Related to Revenue and can be ImmediateWater Materiality Dimensions
10. 10Bloomberg’s BMAPs and WRI Water Risk AtlasE.g. Dow Locations overlaid on regions of high water stressRiver Basins Mentioned by Companies in CDPGeography Matters
11. 11Reference: Water Risks by Industry DatabaseKnow Where Risks Lie in Value Chain
12. 12International Norms and Goals
13. 13Four Steps in Setting Priorities
14. 14Spectrum of Investor Water Priorities
15. 15Examples of Activities to Meet GoalsImprove Water-Risk DisclosureEngage stock exchanges and financial regulators on water risk disclosureManage Water Risks Promote board-level expertise of strategic water issues in portfolio companiesMitigate Water Risks and Prevent Water Degradation Encourage portfolio companies to study cumulative impacts to water resources in key operating regionsAlign with International Standards and Norms Encourage portfolio companies to have an independently audited Human Right to Water and Sanitation policy Positive Water Impact Support regional policies that protect and improve water resources for the long-term
16. Goals Can Focus on Key Investor QuestionsRelated to Investor Priorities: Are my investments upholding our firm’s water priorities, beliefs or policies?Are my investments aligned with international norms (e.g. human right to water, SDG6, UN Global Compact)Related to Portfolio and Security Risks:What proportion of my investments are exposed to significant water risks? What is my value at risk related to water? Can this lead to value destruction for some of my holdings?Can I diversify away these water risks?Is corporate management in high water risk securities mitigating risks adequately? Do I own the top or bottom industry performers on water in my portfolio?Do I have reputational risk exposure from some of my portfolio companies?What is the impact on water resource systems and communities due to investment activities (positive and negative) What are the opportunities related to understanding water risks better?16
17. 17Goals = Corporate Expectations & KPIs
18. Section 3: Buy/Sell Analysis18First Conduct Portfolio Water Risk Analysis to Prioritize Which Securities to Research FurtherDetermine Water Risk Drivers Using the Water Risk DashboardResources for Conducting Sector and Industry-Specific AnalysisWater Metrics and Resources – And How to Use ThemStress Testing and Scenario AnalysisAssessing Impact and Future TrendsPrivate Equity Water Due DiligenceMunibond Water Risk Cheatsheet
19. 19Portfolio Prioritization, Buy/Sell Analysis
20. 20Water Risk Dashboard in Action
21. 21Water Risk Dashboard in Action
22. 22Inventory of Water Research Resources
23. 23Scenario Analysis, Stress Testing
24. 24Future Investor Water Trends
25. Section 4: Portfolio & Asset Class Analysis25Benefits of Portfolio Approach: Uncover Risks Only Visible in Aggregate and Helps Prioritize Security-Level Water Risk ResearchPortfolio Water Footprinting and Risk Heat Mapping Water Risk in Major Investment Indices Portfolio Water Analysis Should Include Assessment of Ownership, Leverage and Risk Mitigation OpportunitiesWater Risks Should Also be Assessed Firm-Wide Across All Asset-Classes
26. 26Portfolio water-risk heat mapping conducted by Florida SBA using MSCI data and FactSet. Red indicates high risk, black indicates medium risk and green indicates low risk. The squares represent the size of individual holdings. Portfolio Water Risk Heat Mapping
27. 27The majority of industries are classified as medium or higher risks across these four investment indices. Ceres classification and analysis using SASB indicators. High Water Risks in Investment Indices
28. 28Example of Across Asset Class Water-Risk Analysis
29. Section 5: Engagement Recommendations29A Successful Water Engagement Strategy is Aligned with Firm Priorities and GoalsThree Key Water Engagement Questions Consider Collaborative Engagement Use Databases of Shareholder Resolutions and Proxy Voting GuidelinesThere are Many Resources and Groups to Support Productive Engagement on Water Track Engagement Over TimeTry and Drive Systems-Level Change
30. 30Three Good Engagement Starters on WaterWhat do you do? Where do water risks lie in your value chain? From supply chain to end of product lifecycle? Where do you do it? What are the regions of concern and what water risks are most relevant or material? What are you doing about it? What is the company’s response to these risks? And how much might the company lose due to water risks?Water Related Engagements
31. 31The Importance of Benchmarking Engagement Progress Engagement as a Journey
32. For more information, visit us: www.ceres.org/investorwatertoolkitwww.ceres.org@CeresNews32