NU Online News Service, Oct. 19, 1:46 p.m.EDT

A burgeoning global population, unprecedented droughts andextreme floods have hit a number of industries includingagriculture, electric power, beverage and apparel, but investorshave few avenues to determine how well companies are managing waterrisks, according to Ceres.

Ceres says in a report “The Ceres Aqua Gauge: A Framework for21^st Century Water Risk Management,” that while somecompanies are taking action to address these risks, others are not.Water risks are increasingly impacting businesses' supply chainsand other areas.

The Aqua Gauge report, developed with close input from 50investors, companies and public interest groups, allows investorsto score a company's water-management strategies against industrypeers, Ceres says.

“The centrality of fresh water to our needs for food, for fuel,for fiber is taking center stage in what has become a crowded,environmentally-stressed world,” Mindy Lubber, Ceres president,says in a teleconference yesterday. “The past year has been one ofunprecedented droughts, floods and pollution incidents around theglobe.”

Lubber notes that industries and companies, “as well as peoplearound the world are feeling the impact directly. For example, therecent record drought in Texas has devastated cotton fields andlivestock, causing an estimated $5.2 billion in economicdamages.”

The apparel giant, The Gap, she points out, which relies heavilyon cotton grown in Texas, “slashed its annual profit forecast by 22percent in anticipation of significantly higher cotton prices.”

Also impacted by water risks, according to Ceres:

• Gas producer Toreador saw its stock price plunge 20 percentrecently after the French government banned the practice ofshale-gas fracturing, primarily due to concerns over the process'simpact on water quality.
• Kraft, Sara Lee and Nestle all announce they will be raisingfood prices to offset higher commodity costs prompted by droughts,flooding and other factors.

“Competing freshwater demands and supply limits are creatingmaterial risks to companies' bottom lines and investmentportfolios,” says Björn Stigson, president of the World BusinessCouncil on Sustainable Development, which worked with Ceres on thereport. “Yet, communication between institutional investors andcompanies on water management has always been limited.”

Even as companies accelerate water efficiency and improved waterresource management, pressures are likely to worsen, Ceres says.Many regions are on course to suffer major freshwater deficits overthe next two decades, according to the report.

Ceres cites a recent study led by McKinsey, which finds that theworld may face a 40 percent global shortfall between forecastdemand and available supplies by 2030.

More than one-third of the world's population—roughly 2.4billion people—live in water-stressed countries, and by 2025 thatproportion is expected to rise by two-thirds, Ceres says. Theseglobal shortfalls will hit hardest in regions such as East andSoutheast Asia where significant investment is fuelingunprecedented economic expansion.

The Ceres Aqua Gauge is available as an Excel spreadsheet thatcan be downloaded from www.ceres.org/aquagauge.