Water, water everywhere – but we should stop and think
Like many of my elderly millennial colleagues, I was subjected to the mass memorisation and recital of poetry. The Rime of the Ancient Mariner lingers in the memory more than most. In case your education sadly lacked exposure to Samuel Taylor Coleridge, the protagonist and his shipmates find themselves shipwrecked with no fresh water, surrounded by the sea they cannot drink. It’s become a metaphor for scarcity amidst abundance.
Maybe it’s the psychology of looking at maps in the news, atlases, or screens while flying that makes us blasé when it comes to water. There just seems to be so much of it. But if you were to put all the world’s water into a gallon jar, less than a teaspoon would be available for us to use—for everything from sanitation and nutrition to agriculture and manufacturing. It’s abundant, but in its useful form, scarce.
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We are used to thinking about water risk purely in humanitarian terms. This summer marks the 40th anniversary of the Live Aid concerts, a global charitable effort to raise money to address the deadly consequences of extreme drought in sub-Saharan Africa in the early 1980s. An excellent three-part documentary just released by the BBC reminds us of those era-defining images. But given the scale and pace of globalisation we’ve witnessed over the last four decades, the world now has a bigger water problem to consider.
Sara Rosner at AllianceBernstein offers a helpful framework for understanding water risk in 2025. She explains how we have too much water in some places (flooding, as we’ve seen with devastating consequences in Texas this week), too little in others, and in a few places the potentially useful water has become contaminated. According to UN experts and the World Economic Forum, these problems are only expected to worsen in the coming years, with a 40% shortfall in freshwater supply forecast by 2030.
That increasing pressure on limited water supplies creates a clear risk for companies and investors. Companies that rely on the predictable availability of clean water could find their operations under strain. They may also face regulatory and reputational pressure if they are seen as heavy users of water in water-scarce areas. So, we’ve seen long-standing engagement with heavy users such as power utilities and agribusiness. But the technology sector is also a major consumer of water – primarily in data centres for cooling, and in the manufacture of semiconductors and other components. Demand for their services and servers is only set to grow with the rise of AI and the so-called magnificent seven. These are not theoretical issues. They are material, non-financial risks having an impact right now. Work on a Google data centre in Chile was halted due to concerns over water supplies, and community protests against new data centres are emerging around the world, including in the US.
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Investors like Rathbones have recognised these trends and begun adopting water as a strategic engagement theme. The Ceres Valuing Water Finance Initiative is a collaborative effort that asks companies to meet six Corporate Expectations for Valuing Water by 2030. It encourages them to treat water as a financial risk and to drive the large-scale changes needed to better protect water systems—essentially, to internalise the externality.
For those of us lucky enough to live in developed economies, these risks can seem remote. We don’t worry for a moment that the clean liquid flowing from every tap will continue to do so safely. We complain about plastic use in water bottles, but rarely question the convenience of having fresh water wherever we go. Yet with every search, every GPT prompt, and every device we own, we are adding to the demand for a scarce and vital resource. Water risks are everywhere – we should stop and think.