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FEATURE ARTICLE - November/December 2012
Investing in Our Water
Peter Zoe (not his real name) thinks about water every day. For the past five years, he’s been hauling water to his home in a water truck.
Zoe moved into his property in the California foothills of the Sierra Nevada mountains 21 years ago. Five years ago, his well water dropped to such an extent that it became undrinkable, even with heavy treatment.
“We had a neighbor who moved in, built a four-million-dollar house, and drilled two new wells and had a 40,000-square-foot lawn with two huge swimming pools and a huge pond—just pumping water every day, all day,” says Zoe. “He did that for about six weeks until he ran the aquifer dry. All of us got affected. These things have a limited ability to recover.”
As Zoe’s situation demonstrates, lack of clean water can affect nearly everything we do. Drought-related US agricultural losses were valued at $12 billion this year—and climate change is expected to increase water shortages worldwide.
“Water tables are falling in several of the world’s key farming regions, including under the North China Plain, which produces nearly one third of China’s grain harvest; in the Punjab, which is India’s breadbasket; and in the US southern Great Plains, a leading grain-producing region,” notes Earth Policy Institute president Lester Brown.
And the United Nations projects that by 2050, one in four people worldwide will “live in a country affected by chronic or recurring shortages of fresh water.”
A growing number of people are using their investment power to combat the scarcity of clean, fresh water. Investing with water issues in mind can have dual benefits: your investments will provide capital to companies working on solutions, while your portfolio may benefit from the growing demand for these solutions.
Investing for Water Security
Water-related socially responsible investing (SRI) generally takes one of two approaches to push for business solutions to the world water crisis.
First, investors can use their shareholder might to engage with companies that are wasting or polluting the world’s increasingly precious water resources, pushing them to act in a manner that preserves clean water for future generations.
Second, investors can put their money into vehicles that support water solutions, such as stock in companies that provide water sanitation technology and clean drinking water infrastructure. According to the World Health Organization, when it comes to drinking water sanitation and water resource management, “every dollar invested leads to up to eight dollars in [societal] benefits.”
In addition to delivering vital social and environmental solutions, good water practices just make good business sense—a 2011 report by investment research firm EIRIS suggests that water scarcity poses a “greater threat to business than the loss of any other natural resource, including oil.”
Invest in Targeted Mutual Funds
Investing in a socially responsible mutual fund can be a great way to put your money towards water solutions. Several mutual funds, including the New Alternatives Fund, Pax World Environmental Markets Fund, and Calvert Global Water Fund include investments in water-solution companies.
The New Alternatives Fund includes substantial investments in water utilities and sewage treatment.
“We invested in these utilities because we felt they were proactive in emphasizing water conservation and access to water in the communities they served,” says Murray Rosenblith, fund director.
Calvert’s Global Water Fund targets water-solution companies, and it also includes water solutions in its other funds.
“We see tremendous opportunity in the water market, given the limited supply of water and the increasing demands,” says Julie Frieder, senior sustainability analyst with Calvert.
In the past, the fund has included stock in companies like Kurita Water Industries, which is working on technoogy to reverse groundwater contamination, and Pentair Inc, which has worked in municipal desalination.
SRI mutual funds also use their shareholder power to engage with companies on water issues. For example, Calvert introduced a resolution at Fossil in 2012, asking the watch and clothing company to report on its risks associated with water scarcity and pollution.
“Leather sourcing and tanning are both water intensive, and Fossil had zero disclosure on how its operations affect water scarcity,” says Frieder. “Our hope is that by asking these questions, we would set in motion some internal action that ends up with improved water management, operation, and disclosure.”
The Fossil resolution received a 31 percent vote, a record amount of support.
Work With a Financial Advisor
As a socially responsible investor, you can invest with water issues in mind—in individual stocks, mutual funds, and more. For assistance, find several financial advisors who specialize in SRI in the “Financial—Advisors & Planners” category at GreenPages.org.
Larry Dohrs of Newground Social Investments in Seattle, WA, notes that an SRI advisor can help you avoid investing in companies with records of polluting or wasting water resources.
“Companies involved in natural gas fracking are probably the ones that are at the most severe risk of being screened out due to water use,” he says. Fracking involves fracturing layers of rock deep within the Earth’s surface, a process that uses millions of gallons of water and has been tied to severe groundwater pollution in nearby communities.
A good advisor can also help you “screen in” positive investments in companies that work on water security.
If you want to make more change, says Dohrs, finding an SRI advisor who helps you engage in shareholder activism is a great way to go. Your proxy ballots from individual stocks that you hold will go to your advisor, not to you. Let your advisor know that you want him/her to pass them on to you, so you can vote with your values. If you don’t vote your proxies, your votes default to management’s recommendations.
Water-Related Community Investments
“Land use is important for protecting and maintaining our water supply, says Charlotte Kaiser of the Nature Conservancy. “How the lands surrounding our rivers and lakes are used and developed affects quantity and quality of water.”
This nonprofit’s Conservation Note helps channel capital to high-priority conservation projects around the world. In exchange for a lower-than-average rate of return, you’ll maximize the environmental impact of your investment, helping to fund projects that conserve natural areas, restore drinking water supplies, and improve lives, says Kaiser.
High-net-worth individuals can invest in a Conservation Note for a minimum of $25,000 for one, three, or five years. Investors may select a rate of return between zero and two percent.
Last year, Oikocredit, a microfinance investing organization, began a $1 million project in India to boost sanitary facilities, water purification, and other infrastructure. With as little as $20, you can invest in projects through its international loan fund: oikocreditusa.org/invest/. Investments are for one, three, or five years and earn two percent interest.
Get Your Feet Wet!
By making a shift in your investments— choosing a water-conscious mutual fund, talking to your financial advisor about your water options, and voting your proxies for water rights—you help lay the groundwork the world needs to face the coming water challenges.
“Water is [one of] the biggest resource issues,” says Zoe. “It’s just a fact of life that we are dependent on a finite amount of water.”
—Martha van Gelder
Vote Your Proxies on Water Rights
2012 was a busy year for shareholder activists, with over 25 resolutions filed on water issues alone. For example, shareholders filed resolutions at Chevron, ExxonMobil, and UltraPetroleum, asking these companies to report on the water pollution and other environmental risks of natural gas “fracking.” All three resolutions received significant backing from shareholders—21.5 percent at Chevron, 29.6 percent at Exxon, and 35.4 percent at Ultra.
“These resolutions have moved companies to take action,” says Michael Passoff,
senior strategist at As You Sow, which filed the resolutions at Exxon and Ultra. “All three companies have improved water recycling for the most part, but they still have a long way to go.”
Look for water issues to keep appearing on proxy ballots in 2013. In fact, Newground Social Investments, a Seattle-based group of financial advisors, recently submitted a resolution to Nordstrom, asking the retailer to report on plans to reduce water use and pollution in its supply chain.
Newground’s Larry Dohrs says that instead of waiting for the resolution to come to a vote, Nordstrom contacted Newground right away. The clothing retailer agreed to improve how it measures the environmental impacts of its products and to join the Sustainable Apparel Coalition, a coalition of apparel companies and nonprofits working to reduce the environmental impact of clothing and footwear.
Dohrs encourages everyone to watch for proxy ballots to arrive in the mail next spring, and to vote for social and environmental resolutions, including those on water rights. “At Newground, we feel that if we want to make change, [engaging] with management and owners is an effective way to carry things forward,” he says.