In recent years, investors have become more aware of the impact catalysts like of climate change, population growth, and declines in freshwater availability have on the global economy. A dramatic example of this occurred in March 2011 when the price of cotton surged 167 percent after years of floods and drought in the world’s key cotton growing regions, coupled with an increased demand for cotton in Asia. This price surge prompted U.S. retail chain The Gap to cut its full-year profit forecast by 22 percent.
Among the range of factors investors are encouraged to include in their evaluation of a company’s financial prospects, water risks have emerged as an area requiring attention. This fact was underscored this past year when the World Economic Forum placed water insecurity as the biggest threat facing the global economy over the next decade. Even in water-rich Canada, these risks have become increasingly important.