Fat Tail Risk is Real: Market Signals and the Business Opportunity Cost from Water

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The last few months have seen a number of press releases and environmental finance panel discussions around the issue of embedded carbon and water risk in portfolios.  While the ESG community is advocating the integration of management and carbon or water intensity metrics in investment decisions, the financial community (i.e. the portfolio managers) argue that […]

Business Water Risk: Can Shadow Pricing Inform Asset Risk Pricing in Capital Markets?

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The economic (cost and benefit) and financial (risk and return) side of business water risk is proving to be very complex to ascertain.  This impacts the uptake or integration of water risk metrics by equity analysts in the risk pricing of assets.  To compound the problem, at many forums on the topic, and in the […]

The Business Water Risk Elephant: Metrics, Investment Decisions and Policy Design

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The fable of the blind men touching and correctly describing different parts of the elephant, but not seeing the whole, has been applied to illustrate many truths and fallacies.  It is particularly apt in fields where there is a deficit or inaccessibility of information and need for communication to integrate the impact of partial viewpoints on policy, […]

Water Risk and Stock Performance: Can Market Signals Drive Corporate Behavior in Water-Rich Basins?

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Good corporate environmental practices have marketing value. Such practices and services can captivate and motivate some consumers. However, real data from capital markets – the flow of money and investment within and to corporations for investments and growth – now indicate that environmental performance can also directly and importantly affect overall corporate risk, financial markets […]

Water Risk Impacts Stock Volatility of Miners: Another waterVaR-Based Market Signal

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In 2013, Moody’s indicated that water scarcity could increase rating pressure on global mining companies, particularly if the accompanying operational and political risk is poorly managed.  There was a big ‘if’ associated with the warning, related to assumptions of regulatory pressure may increase project times and result in procurement of more complex water management systems. […]

Reducing Water Risk Pays Dividends: Market Signals from waterVaR-Weighted Portfolio Allocations (updated)

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Counter to carbon risk, which highly depends on government policies to help set the price on an intangible asset and drive operational costs to make a difference, business water risk is financial risk from the start.  Our work on waterVaR and waterBeta analytics has exposed water risk impacts on asset pricing and volatility.  These can […]

Equarius Risk Analytics values equity volatility risk of water to global electric utilities at 5-12% of VaR

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As the global water community descends on Stockholm for Water Week, equity risk exposure data may serve as a wake up call for corporate risk managers and equity analysts.  To date, business water risk analysis focuses largely on operational risks.  For example, fixed asset overlays of corporate assets on water risk maps, SEC and voluntary […]

waterVaR: A Smart Beta for Portfolio Construction

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The risk impact of water on businesses is increasingly diffusing in investment circles, mainly though ESG indexing, but also via new offerings in the bond market, ETFs and water-driven portfolio designs.  The recent emergence of waterVaR and waterBeta indicators for companies and industry sectors has provided investors with financial risk data on how water impacts […]

Beyond Water Pricing: Does Business Water Risk Reverberate in the Financial Markets?

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A couple of weeks ago, a series of articles in the FT on corporate water risk made front page business news, in part because of the statements from corporate chiefs that water risk may be a more urgent risk issue than climate change.  The article cited Global Water Intelligence, a market analysis firm, to indicate […]