JULY 2019 – 

In this month’s Positive Impact blog we explore the multi-faceted topic of water.


The Importance of Water   

Without water, a person cannot survive for more than four days. 29% of the global population lacks access to safely managed drinking water supplies. The importance of water to life is clear. Water is also a business issue.  For many industries – metals and mining, oil and gas, agricultural products, food processing, semiconductors, chemicals, real estate, restaurants, and more – water and wastewater management are material issues that impact financial and investment performance. 

Water is also fundamentally tied to climate change impacts. Rising sea levels and extreme storms involve water. The human risks and impact are clear. The physical impact of climate change is also a material issue for many industries – insurance, real estate, health care delivery, managed care, and hotels and lodging, to name a few.

71% of the Earth’s Surface is Water

When looking at a globe or a photo of Earth from space, the dominance of the color blue is evident. Water makes up about 71% of the Earth’s surface. Saltwater, contained in the oceans, makes up 96.5% of all the Earth’s water. Freshwater makes up the remaining 3.5%. Interestingly, two-thirds of that freshwater is in the form of ice.

The ubiquity of water is well known and observable. What about the origins of water? According to research by the Woods Hole Oceanographic Institution, the world’s oceans date back 4.6 billion years. Meteorites called carbonaceous chondrites are credited as the depositors of water on Earth.

“These primitive meteorites resemble the bulk solar system composition,” said WHOI geologist and coauthor Sune Nielsen. “They have quite a lot of water in them and have been thought of before as candidates for the origin of Earth’s water.”



3 in 10 people lack access to safely managed drinking water

Access to safe water and sanitation, and management of freshwater are essential to human health, environmental sustainability, and economic prosperity. The United Nations reported that more than 2 billion people globally are living in countries with excess water stress.


Source: https://unstats.un.org/sdgs/report/2018/Overview/

Water scarcity and lack of proper wastewater management hinder social and economic development. Increasing water efficiency and improving water management would reduce competition for water from various users and industries. Water demand worldwide is estimated to increase 50% by 2050.

Source: https://unstats.un.org/sdgs/report/2018/Overview/

The positive economic impacts of improving water access, managing water resources sustainably, and ensuring water quality are both systemic and industry-specific. Demographic and structural headwinds for the developed markets, such as population aging, debt dependence, and productivity challenges, are likely to lead to moderating economic growth in those markets. Less developed markets in Asia and Africa need to accelerate their economic growth to help sustain strong global economic growth. In the least developed countries, only one-third of the population has access to safely managed water sources. Without basic life essentials such as access to water and housing, economic progress is limited.


Water & Wastewater Management Are Material Issues for Investors and Companies

Water access and quality and wastewater management are also material business issues. To assess how prevalent water and wastewater management issues are for businesses, the SASB (Sustainability Accounting Standards Board) Materiality Map is a useful resource. The SASB Materiality Map helps identify issues that are likely to affect the financial condition or operating performance of companies and industries. SASB’s mission is to establish and maintain disclosure standards on sustainability matters that facilitate communication by companies to investors of material decision-useful information.

SASB classifies companies first within sectors (11) and then within industries (77) as subcategories under the broader sectors. The SASB classification system called SICS (Sustainable Industry Classification System) encompasses all the companies in the U.S. stock market as measured by the S&P 500. Only three sectors – financials, healthcare, and transportation – were identified as not having an industry likely to have material exposure to water and wastewater management issues. This means that nearly three-fourths of U.S. stock sectors have at least one industry likely to have material exposure to water and wastewater management.  An industry breakdown of the Food and Beverage sector is below.  To see the entire SASB Materiality Map, visit https://materiality.sasb.org/





40% of the U.S. Stock Market Is Exposed to Water & Wastewater Risks and Issues

Digging deeper, an estimated one-quarter of the total value of the U.S. stock market has material exposure to water and wastewater management issues. If outsourced production inputs and supply chains are included, an estimated 40% of total U.S. market value is exposed to water access, water quality, and wastewater management issues. For example, semiconductor chips are essential components in technology products, including computers and smartphones. Chip integration is also expanding to appliances, automobiles, industrial equipment, and all things digital.

Semiconductor manufacturing requires large volumes of water to remove impurities from the silicon wafers. A large portion of the water used is called ultrapure water (UPW). An estimated 1,500 gallons of municipal water is needed to create 1,000 gallons of UPW. A typical semiconductor manufacturing facility uses two to four million gallons of UPW per day. After the water is used, this wastewater contains heavy metals and toxic solvents and must be treated. Intel, the world’s largest semiconductor company, used 10 billion gallons of water in 2018. Intel’s water management practices enable them to treat and return approximately 80% of their water use to local communities and watersheds.  Learn more about Intel’s water restoration initiative. https://www.intel.com/content/www/us/en/environment/water-restoration.html

With nearly every piece of hardware now incorporating semiconductors, the technology and communications sector’s exposure to water and wastewater management issues expands from the semiconductor and EMS (Electronics Manufacturing Services) industries to hardware and telecommunication services.

Water use is particularly significant in the agricultural products and meat, poultry and dairy industries. These industries are heavily dependent on water in their processes and face significant waste and wastewater management issues. While food retailers and distributors do not have direct material exposure to water issues, consumer and investor demand for greater supply chain oversight are increasing. Major companies, including Wal-Mart, are requiring increased disclosure from food producers on how they are managing water risk and impacts.

With water risks increasing in many regions, both in developing and emerging markets, tensions between water users could escalate. Tighter regulation on usage, efficiency and wastewater management are emerging as material business risks.


What is Your Water Footprint?

While California is the focus state for drought concerns, many states have experienced drought conditions. It is reported that water managers from more than 35 states expect some form of water shortage within the next decade. The past decade has seen increased education and greater awareness of electricity and fossil fuel usage. For example, automobiles must disclose fuel economy measurements. This “you can only manage what you measure” mentality has led to consumers and businesses to seek energy alternatives and energy efficiency. Have you ever read about or been asked, what is your carbon footprint? Probably. Have energy and carbon emissions considerations impacted your purchasing decisions? Hopefully. As more consumers and investors learn about water and wastewater management issues, a similar question could be asked.

What is your water footprint? To learn about your own water footprint, visit https://www.watercalculator.org/


It takes 713 gallons of water to produce 1 Cotton T-shirt

Surprisingly, most of the typical American’s water usage is indirect or “virtual water.” According to the Water Footprint Network, the typical American uses about 2,200 gallons of water per day. Virtual water makes up the vast majority.  For example:

  • A single avocado uses 60 gallons of water to grow
  • One cell phone takes 240 gallons to manufacture
  • It takes 713 gallons to produce one cotton t-shirt
  • A hamburger uses 660 gallons of water to make
  • One gallon of gasoline takes 3-6 gallons of water to produce

Maine and Water

Advancing the sustainable use and conservation of the oceans is particularly important to Maine and New England. The United Nations reported that the global share of marine fish stocks that are within biologically sustainable levels declined from 90%  in 1974 to 69% in 2013. Harmful algal blooms, dead zones, and fish kills are often the result of eutrophication – excess nutrients in estuaries and coastal waters. The primary drivers of eutrophication are excess nitrogen and phosphorus from fertilizer runoff, septic system discharge, and carbon dioxide.

Concerned citizens formed Friends of Casco Bay/Casco Baykeeper® in 1989 after a report identified its waters as one of the most polluted regions in the nation. Cathy Ramsdell, the Executive Director of the organization, states “With the Gulf of Maine warming faster than almost any other marine water body on the planet, we are focusing on the impacts of climate change on conditions in Casco Bay.”


Using a work-with, science-based approach, Friends of Casco Bay has a long history of success, using water quality data to engage the community and advocate for solutions to improve water quality. “In 2016, we established a continuous monitoring station which collects water quality data hourly; this is helping us to monitor and to communicate changing conditions to the public while engaging the community in exploring how best to respond to these changing conditions.”


Climate Change: Too Much and Too Little Water

Businesses, consumers and investors face water-related issues and risks that extend well beyond usage, consumption and treatment considerations. The current and future physical impacts of climate change can be framed as risks from too much or too little water. Sea level rise, extreme rainfall, heat stress, and water stress pose significant threats to individuals and businesses. Four Twenty Seventy, a leading provider of market intelligence on the economic risk of climate change, evaluated all U.S. counties and all cities over 50,000 in population for exposure to climate change risks.

As shown below, the risks and exposure vary by region, type of risk and level of exposure, illustrating that the physical impact of climate change is ubiquitous but differentiated. For example, the mid-Atlantic and Midwest are both exposed to excess water and flooding. However, the mid-Atlantic exposure is related to coastal flooding from sea level rise and hurricanes. The Midwest is particularly exposed to heightened flood risk from shifting rainfall patterns.

 Climate Change Exposure Risk

Source: http://427mt.com/2018/05/22/assessing-exposure-to-climate-change-in-us-munis/

Nearly all companies and industries are exposed to climate change risk.  But, as with the varying regional risk exposures by type and intensity, industries and companies face different types of risks and levels of exposure from climate change. The impacts of climate change for the health care delivery industry range from direct physical damage to hospitals and facilities to reimbursement risks and staff cost overruns from heightened demand. Property insurers face a much different risk. Did they incorporate climate change risks and exposures in their underwriting assumptions? Managed care and medical must also incorporate these exposures in their pricing and underwriting.

Real estate companies face the risk of physical damage and insurability and must incorporate these risks in their planning and development process. Other industries such as hotels and lodging, water utilities and services, forestry management, and mortgage finance companies are likely to have material exposure to the physical impacts of climate change.


Climate Change Risk for Municipal Bonds and Real Estate

Climate change risk extends beyond publicly traded stocks. As shown in the risk exposure map above, many regions have significant risk exposures. As most government agencies and municipalities rely on bond and debt funding, water-related risks are not limited to stocks. For example, Hurricane Sandy in 2012 was estimated to cost local, state and federal agencies over $40 billion.

In a report issued by Blackrock, Investors Underappreciate Climate Related Risk in Their Portfolios, they estimate more than 15% of the current municipal bond market by value would include regions likely to suffer economic losses up to 1%. Commercial real estate and securities collateralized by commercial real estate (CMBS) are exposed to heightened risks from extreme weather. The median risk of a building that backs a CMBS being hit by a Category 4 or 5 hurricane has more than doubled.

Report link: https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/physical-climate-risks

The challenge and opportunity for investors is understanding these risks, estimating the likelihood that the risks materialize and determining the extent to which these risks are currently discounted in stock, bond or real estate prices. These risks also provide an opportunity to identify companies and industries best positioned to manage the risks, and those companies that offer solutions.


Engagement and Advocacy

The World Economic Forum ranked water scarcity among the top five global risks in its 2018 report. Calvert Research and Management, a leader in responsible investing, identified clean water, specifically reducing corporate exposure to water risk and impacts to water quality, as a top engagement priority for companies they owned. BlackRock, the world’s largest asset manager, targets climate risk, including how climate risk may impact a company’s long-term strategy and assessing the board’s role in managing material climate risks, as a priority. TIAA, a large financial services firm, targets environmental and health concerns, including a company’s plan to manage growing water scarcity, as a key engagement issue.

Clearly, water has emerged as a key area of focus for investors, companies, municipalities, and stakeholders. Investors have multiple paths to engage with companies and advocate for issues.  Proxy voting, direct dialogue, and shareholder resolutions are three methods.

Source: Calvert’s 2019 Engagement Report 

Bigelow’s Positive Impact Portfolios leverage the engagement and advocacy resources of larger fund management firms. Bigelow monitors the stewardship and engagement policies and record of the fund managers. BlackRock, the owner of iShares ETFs, is a fund manager in Bigelow’s Positive Impact Portfolios.  In May, Bigelow attended the BlackRock Sustainable Investing Forum and met with the Global Head of Sustainable Investing, Sustainable ETFs team, and the Investment Stewardship Team to understand their investment and stewardship approach for sustainable investing.

Read BlackRock’s 2018 Investment Stewardship Report:  https://www.blackrock.com/corporate/literature/publication/blk-annual-stewardship-report-2018.pdf

In May, Bigelow also met with Calvert Management and Research. Calvert manages funds used in Bigelow’s Positive Impact Portfolios.  Calvert filed resolutions with two companies in the packaged foods and meats subindustry to urge them to adopt a water stewardship policy designed to reduce risks related to water availability and water pollution. One company developed and published a Water Stewardship Policy that applies to the firm’s operations and agricultural and manufacturing suppliers. It intends to establish and disclose water stewardship goals in early 2019 and to report in future years regarding its performance on these stated goals.

Read Calvert’s 2019 Engagement Report:



Sustainability Goals and Standards

In 2015, countries adopted the 2030 Agenda for Sustainable Development at the United Nations. 17 Sustainable Developed Goals (SDG) and 179 specific targets were established. Three SDGs directly involve water access, quality, use and impacts: SDG 6: ensure availability and sustainable management of water and sanitation for all, SDG 13: target urgent action to combat climate change and its impacts, and SDG 14: conserve and sustainably use the oceans, seas and marine resources for sustainable development.  Other SDGs including SDG 3: good health and well-being and SDG 12: responsible consumption and production also involve water-related issues and impacts. The Sustainable Development Goals Report reviews the progress of implementing these goals.

Read the 2019 report here: https://unstats.un.org/sdgs/report/2018/Overview/

While many of these goals require political and government leadership to advance, none of the goals are achievable without the involvement of businesses and individuals.

The Global Reporting Initiative and SASB Water Standards

The Global Reporting Initiative (GRI) provides sustainability reporting standards. The GRI standards are the first and most widely adopted global standards for sustainability. The standards are rooted in the public interest and take a multi-stakeholder user approach. GRI 303: Water and Effluents 2018 sets out reporting requirements on the topic of water and effluents. This standard can be used by an organization of any size, type, sector or geographic location that wants to report on its impacts related to this topic.

Read the GRI standard:


The Sustainability Accounting Standards Board (SASB) developed sustainability accounting standards for the U.S. capital markets and takes an investor user approach. SASB’s industry-specific standards target material, decision-useful, and cost-effective disclosures. As previously discussed, companies and investors may use the SASB Materiality Map to determine the materiality of 26 broad sustainability-related business issues to sectors and industries. The SICS (sustainable industry classification system) look-up tool allows users to determine which SASB accounting standard is applicable to that company. To access, go to  https://www.sasb.org/find-your-industry/



Bigelow Positive Impact Portfolios

Water and wastewater management, water access, water quality, climate change risks related to water, and supply chain considerations are material environmental and social factors for certain industries. Bigelow utilizes internal and external data and ratings information to develop portfolios with above benchmark environmental, social and governance (ESG) ratings. Ratings seek to measure how well companies assess and manage material ESG risk factors and innovate to create long-term sustainable businesses compared to their industry peers.

To learn more about Positive Impact Portfolios and ESG investing, visit https://www.bigelowadvisors.com/pi/



Local Spotlight Organization: Friends of Casco Bay

Our founders chose the name FRIENDS of Casco Bay with purposeful intent. Friends of Casco Bay is a community of people who care about this special place.

Our mission is to improve and protect the environmental health of Casco Bay. Concerned citizens formed Friends of Casco Bay/Casco Baykeeper® in 1989, after a report identified our waters as one of the most polluted regions in the nation. One of our first efforts was to launch a Water Quality Monitoring Program to assess the health of the Bay. Informed by the scientific data that our staff and volunteers collect, our Baykeeping Program advocates for solutions to problems threatening our waters. Our other programs include the Casco Bay Curriculum—designed to help teachers bring the Bay into the classroom, our BayScaping Program—to reduce the amount of lawn care chemicals flowing into our waters, our vessel Pumpout Service—to help boaters be better stewards of our environment, and numerous volunteer projects. We are a founding member of Waterkeeper® Alliance.

Friends of Casco Bay has over 2,400 active members and over 300 volunteers.

To learn more, visit https://www.cascobay.org/