As environmentalism grows and ESG targets are set higher and higher, SVM European fund manager Hugh Cuthbert expresses his thoughts on global droughts and his disappointment at the inherent lack of companies reporting water usage, especially when considering the effect on the economy.
The recent series of droughts across Europe has been alarming and despite its reputation as a wet country, the UK has just suffered one of its driest summers on record. When placed in a global context, droughts have very obvious implications not only from a humanitarian perspective but also from an economic viewpoint, with clear consequences for the financial health of many of the companies in which we invest.
A current example of the effects being felt can be seen with the Rhine in Germany, which saw water levels close to where the waterway became impassable for the barges which play an important role in the supply chain of the heavy industries which populate the river’s banks.
Agriculture too has suffered from the lack of rainfall. The European Environment Agency believes this to be a clear long-term trend, citing that between 2000 and 2019, the productivity impact on croplands in the EEA-39 region was a 4% annual decrease in yields in the impacted areas, with the last decade showing the most intense drought years.
However, unlike attitudes to reducing carbon emissions, water usage has been pushed further and further down companies’ reporting agendas and the actual number of companies that report on the issue is far too low. For example, the SVM All Europe SRI Fund has only six companies reporting water usage out of thirty that are in it.
It is imperative companies take more responsibility to protect the economy and subsequently their future financial prospects.
