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September 6, 2021

Apparel impact on global water resources is critical

The apparel sector has a critical impact on global water resources, according to research from environmental disclosure platform CDP.

By Hannah Abdulla

The CDP has launched Water Watch: Water Impact Index, which reveals the world’s most polluting and water-intensive industries, with apparel financial services and fossil fuels found to have greatest impact on the world’s water resources based on an assessment of over 200 industrial activities.

The Water Impact Index is a tool designed for investors and lenders to allow them to assess the potential impact of their portfolios on water resources and water security.  It can also be used by companies to assess the potential water impact of different parts of their business and value chains.

Grounded in independent and trusted academic, scientific and industry-recognized sources, the tool assesses the water impact of each industrial activity at different stages of the value chain. The apparel and textile manufacturing sector, cotton farming, livestock farming, oil and gas extraction and mining are amongst the sectors found to have the largest potential impact on water resources.

This is the first tool of its kind that allows financial institutions to understand the relative impact of different industrial activities on the world’s water resources. In doing so, the tool fills a critical data gap in the efforts of financial institutions to understand and address their exposure to water risk.

Through this tool, CDP hopes to provide the capital markets with the information needed to take action on water security – an area where progress has lagged behind other environmental issues, such as climate change, both in terms of how well the risks are understood, and how well integrated they are into investment decisions. CDP is also working on a tool that couples this impact data with CDP’s corporate action data.

Cate Lamb, global director of water security at CDP, commented: “Achieving a water-secure, net-zero future will require a complete transformation of our global economy and urgent action is needed. To succeed, companies responsible for the greatest impacts on water resources must transform their business models, products and practices in ways that decouple production and consumption from the depletion of water resources.”

Adam Black, head of ESG & sustainability at Coller Capital, commented: “ESG monitoring and engagement are core elements of our programme and we constantly seek new methods, data and tools to enhance our approach. However, as a secondaries investor with indirect exposure to thousands of underlying companies, we recognise the inherent challenges to effective monitoring and engagement. In that regard, we view the Water Watch as a valuable tool to efficiently screen our portfolio for water impact and identify particular company exposures where we may look to engage further on these risks. We look forward to using the tool to inform our work and to continue collaborating with the Water team more broadly as a member of CDP.”

Last month, Just Style shared the detail from Water Witness International’s new report which suggests the clothing sector is competing with local communities and nature for access to scarce water in Africa and that in some cases, factory needs are prioritised over human rights to water.

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