Water footprint as an indicator of sustainability
When it comes to ESG metrics, the carbon footprint is usually included. The figure is collected both by companies themselves and by external providers. „That’s relatively easy to estimate by comparison“, explains Walter Hatak, Head of Responsible Investments at Erste Asset Management – the water footprint is more complex.
„It tells us, on the one hand, how efficiently companies use water, and on the other hand, in which regions water is being extracted", Hatak explains in the Börsen-Zeitung podcast „Nachhaltiges Investieren“.
Unlike CO₂, water has a local component – while water availability is good in some parts of the world, other regions face scarcity. „Some companies aren’t exactly eager to reveal how efficient their processes are and how much water they consume“, Hatak observes.
Limited data
Erste Asset Management first collected water footprint data eight years ago, for World Water Day on March 22. „We began exploring: what data is actually available in the market? What do the providers offer?“ It quickly became apparent that data coverage was low. Data was available for less than half of the companies included in Erste Asset Management’s funds.
Since then, the data situation has improved, and Hatak estimates current coverage at over 70%. „What’s still missing – unlike with CO₂ – is clear standardisation“, he notes. Some companies report water use only for certain segments, and there are frequent measurement errors. „There’s still a great deal of manual work required.“
Water becomes a cost factor
From Hatak’s perspective, the water footprint could serve a similar role to the carbon footprint. Both figures act as indicators: „CO₂ is a leading indicator of how global warming will progress“, he states. In the field of biodiversity, species loss is currently the primary metric. „A leading indicator that could become relevant in the future would definitely be water.“
From an economic perspective, companies should also be paying closer attention to water, he argues. For instance, microchip manufacturers depend on clean water. The resource therefore has a financial dimension, says Hatak. „We already know that water is becoming scarcer.“
That’s why it’s important not only to consider whether production sites are at risk from floods or droughts, but also to pay attention to how water-efficient the processes are, he advises.
