Our Focus on Water Stewardship
By Cindy Bohlen, CFA
Water stewardship is critical for business and societal well-being because it ensures that the water resources needed for industry and communities are managed sustainably. This includes protecting water quality and quantity, reducing the risk of water scarcity and ensuring that access to clean water is available for all.
For companies, water may present business risk and opportunity. During our due diligence of potential and active investments, particularly those that extract or manufacture, we see potential water-related risks in the areas of access, regulation, reputation and more. Our engagement practice seeks to raise management teams’ awareness of those risks. For example, in recent months, we’ve discussed water-related risks with management teams at three food producers.
Our goal is reduced business risk for portfolio companies and better outcomes for society and investors. In our view, everyone benefits when companies take a systems stewardship approach to sustainability. That’s true in many areas, with water among the clearest examples, given that seventy percent of the world’s freshwater is used in agriculture, and is therefore critical for food production. If companies lack sound stewardship practices, everyone is impacted.
We value our association with The Water Council, a Milwaukee-based non-governmental organization with an international reputation for supporting corporate water stewardship and fostering water-related technology. Our due diligence and engagement processes are enhanced by insights from The Water Council’s experts.
In 2021, Riverwater became a Water Champion partner organization of The Water Council. The relationship is a good example of how we implement the third pillar—Collaboration—of our Three-Pillar Approach to integration of environmental, social and governance (ESG) factors into our investment process. (The first two pillars are Due Diligence and Engagement.)
We participated this fall in The Water Council’s annual Water Summit. The dialogue between domestic and international participants was striking. We heard from stakeholders dealing with the water crisis in the Colorado River basin, from entities impacted by PFAS[1] in water, from experts on the potential for conflict in water-affected regions of the world, and more.
We have also referred companies to The Water Council’s program for water stewardship, WAVE. We see the WAVE program as an ideal vehicle for management teams to identify their greatest water challenges and opportunities—and to create a plan to address them.
As with other ESG-related risk factors, companies don’t have to be perfect to take initial steps. We see our role as investors as helping them along the journey of sustainability—in ways that we believe can benefit everyone involved.
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Cindy Bohlen, CFA, is Chief Mindfulness Officer & Analyst at Riverwater Partners, which manages ESG strategies for institutions and individuals with a focus on small- and mid-cap stocks.
[1] PFAS stand for stands for per-and polyfluoroalkyl substances and are manmade chemicals used in consumer and industrial products. They’re often referred to as “forever chemicals,” because most don’t break down.
