Climate Change and the Threat to Water Security
May 31, 2023
The ever-evolving global water crisis presents FAB leaders with a host of interconnected risk capital and human capital risks and opportunities.
Key takeaways:
- As climate change continues, water quality and availability will become a critical issue for communities and businesses.
- Water, micro-plastics and carbon reduction are key performance indicators for organizations’ climate commitments.
- Solving the water crisis requires a multipronged and collaborative approach from policymakers, businesses, their stakeholders and consumers.
Overview
While carbon emissions reductions and paths to net-zero have been major business priorities in recent years, the supply and quality of water is emerging as a challenge for leaders to address. A 2023 United Nations report reveals that an estimated two billion individuals lack access to clean drinking water, while another 3.6 billion are without safely managed sanitation. At the same time, the number of people living in towns and cities who face water scarcity is expected to rise from 930 million people in 2016 to as many as 2.4 billion by 2050. These numbers are only projected to rise if no action is taken.
Tami Griffin and Ciara Jackson, Food, Agribusiness and Beverage Industry Practice leaders at Aon, explain the nature of the evolving water crisis and how organizations are adapting and responding.
Right now, where are the places with the most pressing water issues? What’s causing them?
Tami Griffin: I’d say in the U.S., California and the Southwest is an obvious choice. Because of all the snow and rain, most of the region has moved out of drought conditions — but that doesn’t eliminate their water crises. Decades of excess water are needed to fully replenish water levels, with the Colorado River basin still less than 50% of average. People still need to conserve. People still need to be investing in technologies for better irrigation, management and to try and find long-term solutions.
What we will see in the future is that water will either be a boom or a bust. Geographies will get no water at all, or they’ll get it all at one time. That’s what we saw in California. We hadn’t had water, then we had massive atmospheric rivers that created rain and incredible snowpack across much of the Pacific Northwest. But all that water now is leading to flooding.
We’re seeing that the Tulare Lake basin — whose rivers were dammed and diverted for agriculture in the early 20th century — is filling up. You have thousands and thousands of acres that will be underwater as well as communities. Over time, the overpumping of the aquifers caused the land to sink making homes and crops more vulnerable to flooding.
Ciara Jackson: Europe was also hit hard last summer. There were serious droughts in Italy and the Po Valley, as well as in France and Spain. It’s impacting crop yield and water quality as well — the quality is just as important as the quantity. I think we’re about to enter an era where there will be competition for water. Already, water scarcity is an issue in areas like Sub-Saharan Africa.
What are public entities and organizations doing to help ease these water crises and prevent more in the future?
Tami Griffin: The solutions are multi-pronged. We have to think about what we’re consuming because food production requires a lot of water, and agriculture alone accounts for approximately 70% of global water use. But there’s a lot of technology that can help, such as smart irrigation. Instead of irrigating an entire vast field, you put it where you need it and when you need it using technology, data & sensors.
On the public side, the infrastructure to manage water across the globe is very neglected and has been for years. You have to think about how to store and manage water, because a lot of that water that flowed into California went back in the Pacific Ocean.
Ciara Jackson: In the same way that companies are voluntarily signing up to get a Task Force on Climate-related Financial Disclosures certification, for example, companies will likely report on water stewardship as a key performance indicator in the same way as they’re reporting on carbon reduction. I think some of the leading companies are creating a point of differentiation by being proactive around water stewardship, and disclosure may help change behaviors.
More broadly on climate, there’s a view that these different voluntary disclosures will evolve to become mandatory, and key investors and stakeholders will likely make investment decisions based on what they’re seeing in these disclosures. the benefit of disclosures become mandatory is that definitions become consistent, and investors can compare two companies and make their investment decisions accordingly.
There’s an evolving concern, and it’s possibly a little bit more tenuous, but we’re starting to see some class actions and some litigation around climate decisions. Is the next wave of climate-style class actions going to be around water?
What innovations are being developed to respond to issues with water conservation and improve water quality?
Tami Griffin: Regenerative agriculture and the conversation around how to store more water in the soil is discussed frequently. What we know is that when you have healthy soils, they act as more of a sponge and they hold water, which is a good thing. Healthy soils release water slowly so you don’t need as much. And it’s a better filter as water seeps into aquifers. In regenerative agriculture you have less reliance on man-made pesticides, fertilizers and those types of things, so there’s less nitrogen and phosphorus to run off. Nitrogen and phosphorus cause big toxic algae blooms in fresh water and in ocean water, kill off marine life and are not good for people either. Regenerative agriculture also has a lot of benefits in terms of carbon storage, so it’s a big plus.
Ciara Jackson: I’ve heard talk of changing crops to those that are less water-intensive. There are also discussions around cover cropping, which involves planting a different crop to optimize land usage when the land is fallow. Another example is that there is more R&D time being invested in smarter watering systems.
In terms of water quality, there are many questions surrounding recycling water. A lot depends on what you need clean water for: human consumption versus watering a field. If it’s 90 percent clean, it is clearly not fit for human consumption, however are there alternative uses for this waste water? Getting better at recycling water and directing its use in the appropriate way has the potential to make a big difference.
To find out more about Aon’s insights on climate change and sustainability,click here.
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