Water resilience: why measurement comes before capital

Anusha Seshadri, Head of MENA and India, Principles for Responsible Investment

Water touches almost everything an investment portfolio holds, across sectors and geographies. The risk takes three forms: too little water, too much or too polluted, and each now carries a price.

Under a water-stress scenario in East Asia, CISL and HSBC found that a third of heavy-industry companies would drop from investment grade to speculative within a year.2 Because flood risk is not reflected in prices, US homes may be overvalued by an estimated US$187 billion.3 Pollution has left one manufacturer with liabilities above US$10 billion and cost one utility a £123 million fine in 2025.1

The measurement gap

Investors have taken notice. Requests for water data through CDP, the global environmental disclosure platform, rose 122 per cent in 2024, and companies reported US$596 billion in potential financial impacts from water risks the year before.1 Governments are paying attention too, including at the UN Water Conference.

Measurement has not kept pace. In 2023, only 13 per cent of financial institutions measured the water impacts of their portfolios, compared with 72 per cent for climate.1

Part of the reason is that water rarely has a category of its own. It is usually folded into a wider analysis of nature or climate risk.

Averages hide the risk

Water risk depends heavily on location. Two plants owned by one company can face very different conditions depending on their river basin, so company-wide figures can hide the real risk.

Planet Tracker modeled more than 950 chemical plants across 62 countries. Just ten of them carry almost two-fifths of the total risk from water stress, and four regions carry about a fifth of the assets by value, but nearly half the risk.4 Investors holding several chemical companies may depend on a few shared water systems far more than company reports show.

Risk also extends beyond a company’s own site. It can secure its supply and cut its water use yet still be exposed if others overdraw the same underground water or the local utility cannot meet demand.

What would close the gap

Better reporting comes first. Most corporate water reporting covers only how much water is taken, rarely local basin conditions, supply chain risks or water quality. The gaps are widest in energy, apparel and agriculture.

Comparable measures come next. Water indicators are less standardized than those for climate. The Taskforce on Nature-related Financial Disclosures (TNFD) is helping to align them, but investors will need new skills to use them well.

Five practical steps

PRI research sets out five steps for investors.¹

1. Find out which holdings face the most water risk. Screening tools such as ENCORE and CDP Water Watch show where risk is likely; tools like WRI Aqueduct and the WWF Water Risk Filter pinpoint risk at the basin level. Use several: any one tool can miss local conditions.
2. Use standard frameworks and measures, including data on location and supply chains, rather than generic water use figures. Robeco, for example, checks companies in the sectors CDP identifies as having the greatest impact on water against limits on water use per unit of output, based on the Planetary Boundaries framework of what the planet can safely sustain.
3. Build water into risk models, stress tests and valuations. Foresight Group did this when it assessed water and other natural hazards across 500 infrastructure projects it invests in.
4. Engage priority holdings on water resilience, through platforms such as Ceres’ Valuing Water Finance Initiative, whose six expectations for companies give investors a common basis for engagement.⁵
5. Invest in water solutions and work with others to expand them. These can reduce dependence on scarce water, keep operations running and protect long-term value.

The opportunity, and what it will take

Investor interest in water solutions is high. In a 2025 survey of more than 300 senior decision-makers across the water value chain, including investors, 40 per cent named water-related opportunities their top investment priority, and nearly 30 per cent were investing more than US$500 million a year in water infrastructure, technology and services.1

But the financing gap is far larger. Meeting the UN goal of clean water and sanitation for all (SDG 6) will take around US$1 trillion a year. Public institutions provide roughly 91 per cent of global water financing, private capital less than 2 per cent.6 For infrastructure projects to attract more private money, investors need reliable ways to see where money is needed, judge the risks and measure the resilience benefits it can deliver.

Practical guidance for investors building capacity is emerging, including the International Finance Corporation’s guidelines on water and ocean investment and the World Economic Forum’s work to align investment strategies with water innovation.

Collaboration is part of the answer, as PRI research highlights.1 Aviva, one of the UK’s largest insurance and pension companies, chairs the FloodAction Coalition, which is building a market for investment in natural flood and drought protection.7 It is developing standards to measure and verify results and pairs asset holders facing water risk with nearby landowners who can reduce it. Several of its members, from insurers to utilities, carry the very flood risk the projects are designed to reduce. From a £150 million pipeline in 2026, it aims to build a £1 billion market by 2030.

Water risks erode long-term value and make it harder for investors to meet their duty to their clients. The good news, as PRI research sets out, is that the first step is within reach. Measurement comes before capital, and once investors can see where exposure lies and where risks and opportunities are likely to emerge, resilience becomes investible.

Sources

• [1] PRI, Assessing and managing water-related risks and opportunities, April 2026

• [2] CISL and HSBC, Impact of water curtailment on the credit rating of heavy industry, April 2022

• [3] Gourevitch et al., Unpriced climate risk and the potential consequences of overvaluation in US housing markets, Nature Climate Change, February 2023

• [4] Planet Tracker, Don’t Put All Your Plants in One Basin, October 2026

• [5] Ceres, Valuing Water Finance Initiative

• [6] World Bank, Funding a Water-Secure Future

• [7] FloodAction Coalition launch material, convened by The Conduit and chaired by Aviva, November 2025