A framework to assist the financial community in incorporating water risks into their investment decisions

Abstract

Recently, much attention has been paid to the fundamental meaning of water resources, with regard to the efficient operation of the business community and the viability of the financial market by a range of financial stakeholders such as the banking sector, insurance companies and investors. The main concern of these actors is to avoid significant financial losses associated with water problems namely, the deterioration of water quality, water overuse, supply chain risks and climate change effects. This article proposes a framework to assess business risks that are associated with water resource problems. The proposed framework is based on ideas from current benchmarking and scoring accounting systems which drew data from published corporate environmental reports. By identifying the relationship between environmental and financial issues, it would enable actors of financial markets to make better investment decisions. It was applied to a number of Greek businesses certified by the Environmental Management and Audit Schemes certification system.