Financed Water Consumption
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Financial institutions increasingly recognize water scarcity as a financial risk, but few can say how much water consumption is associated with their lending and investment portfolios. This joint paper from MSCI, Guidehouse and the Water Footprint Network sets out and pilot-tests a PCAF-inspired method for attributing company water consumption to a financial institution’s portfolio.
Drawing on a pilot with five financial institutions, it shows what the approach can deliver today, where data gaps limit it and what needs to come next. For banks and other financial institutions, the approach provides a practical starting point for identifying water-intensive exposures and informing risk management and client engagement. A key consideration is data quality: the framework uses five tiers, ranging from verified company-reported data to sector-level estimates, as shown below.
Each financed water consumption figure is scored from 1 to 5 by the data behind it, from verified company-reported water use down to sector-level estimates, showing how much of a portfolio result rests on stronger or weaker data. Source: Guidehouse, MSCI, Water Footprint Network
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