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United Nations Department of Economic and Social Affairs Sustainable Development

Hundreds of financial institutions controlling trillions are acting on water transparency and accountability

CDP Worldwide (
Non-governmental organization (NGO)
)
#SDGAction50355
Description
Description

Finance has been identified as one of the key pillars of the UN Global Acceleration Framework for SDG 6. Achieving a water secure, net zero economy will require a complete transformation of our global economy. Triggering such a transformation is a game-changer.

Global financial institutions (FIs) can offer unique, systemic incentives for change by ensuring their investment, insurance, lending, rating and underwriting practices drive these water users to use water wisely, to not pollute water, and to promote its reuse. Banks, shareholders and the FIs that own or lend to them currently enable companies to undertake economic activities, which in many cases are profoundly detrimental to the environment. By asking Fis to be transparent about the water-related risks and impacts that they are exposed to through their financing activities, we seek to reduce the flow of capital to water destructive activities and businesses and increase flow to those that value water appropriately.

Members of the Network of Central Banks and Supervisors for Greening and Financial Systems (NGFS), and the European Central Bank (ECB) have all acknowledged the need for financial institutions to disclose water-related data however they stop short in recommending exactly what should be reported. The outcome and lessons learned from this work will contribute to dialogues underway between CDP and these important institutions to inform regulatory development.

Over the last two years CDP developed an initial set of water security indicators that were informed by a technical working group of industry participants; these indicators have since been incorporated into CDP’s questionnaire for the financial sector. From this, we have global evidence from 275 FIs on how they assess water risk and opportunities, define water strategies and engage with companies. In 2023, an invitation to disclose was sent to over 1,200 financial institutions – watch this space!
Our data show that hundreds of financial institutions controlling trillions are acting on water transparency and accountability.

The evidence that CDP generates from this data is channelled to FIs, public facing resources, and governments to increase their understanding of what is needed to align finance with a water secure world. With hundreds of FIs setting water-related actions, and leading countries updating national Sustainable Development Management plans, the opportunity for greater ambition abounds.

Already, CDP is close to publishing a public interface to explore the actions that financial institutions are taking to reduce their water impact and become stewards of water resources around the world. This interface is soon to be published on the CDP website to highlight action already being taken and to promote further, more ambitious commitments and actions from financial institutions.

Expected Impact

By focusing on financial institutions, this intervention ensures a key accountability lever in the global water sector is activated and empowered to act in line with global ambitions regarding water security. To stem the water security crisis, businesses, which wield control or influence over 70% of the world’s freshwater reserves, must change their approach to how they use and impact upon this resource, in essence, learning to operate differently. Many of these companies are transnational and as such, their growth plans and strategies are beyond the influence of any one national government. So, while national governments can exert control over how a particular factory within its jurisdiction engages with water, it cannot influence the way in which the company that owns 5,000 other factories around the world chooses to respond. It would take a concerted and highly coordinated effort by multiple governments to bring just one firm into line with international water goals. FIs, on the other hand, can and do exert this type of influence, giving them unparalleled potential to shift companies toward a more sustainable future. They also have the potential to significantly influence the course the corporate sector takes on exposure and vulnerability to water risks, and water stewardship.

Through this initiative, we expect to make governments, regulators and FIs aware on the actions that are underway and understand what more is needed to align finance with a water secure world.

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Timeline
01 June 2021 (start date)
31 December 2028 (date of completion)
Entity
CDP Worldwide
SDGs
Region
  1. Global
Other beneficiaries

CDP´s programme on increasing transparency of the financial sector on water started in 2021 and has already produced global evidence on whether and how financial institutions (FIs) disclosure risk, opportunities and impacts on water security. This evidence is already being used in the development of a public interface to present FI water commitments and will be used in future to support the FIs in their transition to a water secure world, and financial regulators on the identification of key metrics for water disclosures.

More information
Countries
Ibero-American Network of Life Cycle Assesment
Contact Information

Cate, Global Director, Water Security