Time to talk dirty ponds not clean fish — or why “water positive” isn’t going to save shareholders (or companies)
By Alexis Morgan, WWF Global Water Stewardship Lead
Listen, I get it — “water positive” is catchy. Who doesn’t like to go “beyond zero” and have a “positive impact”? We all do, and it’s an admirable aim, but you all need to know: “net positive water” won’t save you, and it won’t save shareholders from losing their investments.
To use the analogy from the title: you can be as clean a fish as you want, but if the pond (aka river basin) stays dirty (or gets even dirtier), your clean fish is still going to die (and with the dead fish, come poorly performing stocks for shareholders).
In recent months we’ve seen the dialogue on “net positive” water continue to grow, with the latest coming from Global Water Intelligence in their White Paper — Moving towards water-positive impact: holistic water stewardship. But let’s be very clear: “water-positive impact” and “holistic water stewardship” couldn’t be further apart.
WWF has been engaged on water risk and water stewardship for a long time and continue to champion restoring freshwater systems. Heck, when we got started on the topic more than a decade ago, people barely even cared about water or knew what the concept of “water risk” was. Over the years, and through the development of tools such as the Water Risk Filter, or those from our friends at WRI and WBCSD, we’ve helped to raise the profile and awareness of the concept of water risk.
However, water has always played second fiddle to some extent to climate and carbon.
In recent years, the realization of the risk of carbon transitions and climate impacts started to finally take hold with investors. The Taskforce for Climate-Related Financial Disclosures (TCFD) brought home to investors that climate is, and will increasingly, impact shareholder value. It will strand assets — not only due to the transitions required to reach a 1.5 degree future, but also because assets will be impacted by a world that is increasingly unstable.
From droughts to floods — all of which we’ve seen in abundance these past few months from Europe and East Africa to Pakistan — assets are unable to be fully productive (at best) or have had to be entirely written off (at worst). These are water risks manifesting through the lens of climate, and they are only made worse as we lose the ecosystems that help to dampen the impacts of climate change. While nature remains the next frontier (and continue to keep an eye on the Taskforce for Nature-Related Financial Disclosures, which I hope will awaken investors to the risk facing the ongoing collapse of biodiversity), water will continue to be on the frontlines of both climate impacts and freshwater biodiversity loss.
But what does all this have to do with net positive water? Let’s dig in.
Net positive strategies typically are pretty simple: reduce your impact/footprint and then tackle the rest through investments in the basin (via notions of “replenishing”, “restoration” or “contributions”). As long as you “save” more than you “use”, you’re net positive.
Its appealing in its simplicity, but ultimately flawed because it fails to recognize the bigger issue in play: the state of the basin.
In the end, it doesn’t really matter if you use a lot of water or a little. What matters is whether the basin is healthy or dying. To draw further on the analogy: a good company can do many things to become a “clean fish” (highly efficient, low pollution, provision of sanitation and hygiene to its workers, etc.). All of these things are admirable, and I might argue even critical, to a company that wants to outcompete and outperform. However, none of those factors will ultimately matter if the basin (i.e., the “pond”) is running out of water, or failing. So while “net positive” focuses on the fish, “holistic water stewardship” cares about the fish AND the pond. The two are not the same.
And therein lies the problem with notions of “net positive water” — they’re all about being clean fish and claiming that a company is doing its part to be a clean fish. But they don’t track whether the pond is healthy or dying.
As we move towards science-based targets for nature, we must not mistake the achievements of targets (doing my part) with the status of the systems we’re collectively trying to save. In other words, SBTs are good — but insufficient to save the underlying systems upon which all life, and all business, depends.
Shareholders are ultimately seeking value creation out of assets. As such, investors need to increasingly ask the question of whether the places (i.e., the basins, or “ponds”) that their investments land are themselves sustainable. Not just whether the companies are good actors, but whether the basins are in trouble. It is the places that will determine whether assets get stranded, not the companies, and “net” will not matter one bit. We need to start scaling investments in basins — not just to “net zero” — but sometimes 5x, or 10x, or maybe even 100x a given company’s water usage. We need a race to the top, not a bare minimum bar.
We are well beyond the time when we need to start supplementing the evaluation of corporate activity (which is useful for comparative purposes) with the evaluation of basins (which gives us a sense of potential stranding of assets).
WWF, together with Deltares and WRI, are working on a platform — Global Water Watch — which aims to support better basin (especially reservoir) monitoring. Providing near-real time of water bodies is one measure that can help to inform that status of a basin. We’re also working with Gybe to build out efforts to evaluate water quality using scalable remote sensing approaches. We are also pushing towards the development of HydroSHEDS 2.0 — which will form a critical backbone of geospatial data that can be used to create consistent monitoring and reporting of basins.
Basin status is the common theme, and will form a core metric of how we evaluate our efforts and our partners efforts as we look to the future. Basin status will remain our north star, and it needs to rise up the agenda for both companies and investors alike.
So — let’s not dilly dally with net positive. It’s a heartwarming narrative, which yes, sends us in the right direction, but it massively undercuts the ambition that is required. Incrementalism will not save ecosystems, businesses or investors from losing their money. Moreover, it is not the measure investors should care about because no matter how clean the fish is, it’s the pond that matters.
Simply put: let’s start measuring the pond and not just care about “net positive” as the latest buzzword, but rather just plain old “healthy basins”.
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For more on WWF’s concerns, you can read WWF guidance for companies on Net-Positive water
