Investors are warned about the substantial financial consequences of ignoring the increasing water shortage, according to FAIRR

In the face of growing water scarcity, the need for water resilience in the agrifood sector has never been more crucial. This transition requires action from various stakeholders, including investors and companies throughout the agrifood value chain.

Currently, disclosures around water insecurity risks are relatively low, making it challenging for investors to fully comprehend risks at both the individual and portfolio levels. Beef producers are leading the way in these disclosures, but it is evident that dairy producers need to step up their game.

To better understand their water risks, companies can start by defining their current water withdrawals at the basin level across their supply chains. This will provide them with a clear picture of their current water usage and help identify areas where they may be over-relying on scarce resources.

Once they have a grasp of their current water dependencies, companies can work with investors to develop strategies that focus on restoring and conserving non-renewable water resources and adapting to shifting rainfall patterns. This could involve investing in sustainable technologies, implementing integrated water management practices, and enhancing water-use efficiency.

Investors, on the other hand, can encourage companies to set water efficiency or reduction targets. Depending on the level of advancement of the companies in setting water resilience strategies, these targets could be linked to executive pay, or investors could support companies in increasing the ambition of such targets.

Several investment groups, such as the Global Agriculture and Food Security Program (GAFSP) and the Water Resilience Coalition, have joined forces to target companies in agriculture with livestock farming. Their aim is to improve water resilience across the agrifood value chain. They recommend that investors and companies adopt integrated water management practices, enhance water-use efficiency, and invest in sustainable technologies.

By working together, investors and companies can help ensure the long-term sustainability of the agrifood sector, safeguarding it against the impacts of water scarcity and contributing to a more resilient and secure food system for all.

Investors are warned about the substantial financial consequences of ignoring the increasing water shortage, according to FAIRR