Do you value water?

Take a step back and reflect on how we value and manage the world’s most vital resource, ask Thomas Schumann, Markus Barth and Teresa Russell.

2021 World Water Day is March 22nd. This day provides the opportunity to reassess how water is consumed and managed globally. This year’s theme of ‘valuing water’ is especially pertinent in the asset management context.

Water is invaluable to humanity in supporting life and overall well-being. However, there is also a business case for prioritizing water resource management.

Water risks including infrastructure breakdowns, pollution, and water-related natural disasters negatively impact a company’s bottom line, and these risks are only expected to grow as climate change effects intensify. Not only that, but the business costs associated with these risks are projected to be $300 Billion or five times greater if left unaddressed.

Until recently, climate risk has focused solely on the level of carbon emissions. However, companies can continue operating even while spewing massive amounts of carbon into the atmosphere. Without access to water, many companies simply have to shut down, which severely impacts their future viability and profitability.  As a result, investors increasingly use water security as a proxy for climate security.

As the financial pressure to remedy these issues mounts, so too does the value of water security. Good water stewardship by consumers, corporations, and investors alike is clearly key to a flourishing society and sustainable global markets. However, according to a recent update by UN-Water, we are not on track to meet Sustainable Development Goal (SDG) 6 and achieve a water-secure world by 2030. 785 million people still lack safe drinking water and 2 Billion people lack improved sanitation, and the COVID-19 pandemic has the potential to exacerbate water scarcity worldwide if no actions are taken.

As a last-ditch effort, UN-Water developed the SDG 6 Global Acceleration Framework which outlines how we can fast-track the path to water security. Its top recommendation is to optimize financing, calling out the financial sector’s capacity to create a game-changing positive impact.

Recent U.S. SEC and EMSA MiFID II regulations also promote responsible investing by integrating climate risk, sustainability and ESG into reporting requirements.

The stage is set for firms and investors. The question is, what is the most effective engagement strategy for improving water management?

The World Economic Forum identifies transformational investment as the solution to systemic risks such as water crises. These investments can tackle long-term water risks while also generating competitive returns, a win-win-win for the environment, society, and investors.

One responsible investment approach recommended by the DWS Research Institute for improved water management is Risk Control, which involves investing in the broad market while reducing exposure to companies with high water risk. This strategy is the best of both worlds: it provides attractive returns and encourages water stewardship. Thomas Schumann Capital’s investable water security indices and investment products embody this approach by simultaneously promoting water security and delivering sustainable returns while providing global capital markets with the world’s first ever water footprint in equities.

Other investment types include Thematic Equity Funds, which invest in water utilities and companies associated with water purification equipment manufacturing; Positive Approaches, which only invest in companies demonstrating good water stewardship, and Direct Investor Engagement with corporations on their water policies. These approaches can be limited by accepting greater trade-offs between return and positive impact.

Water is not a commercial “commodity” such as gold, oil, gas, sugar or wheat, and is neither sustainably viable nor commercially suited to be traded as such on Wall Street. Access to clean water and sanitation are recognized by the United Nations as human rights.

Clean air, and clean water are the world’s most precious resources, resources that require utmost stewardship, appreciation, and integrity. The value of water cannot be understated. Water risks are present in all industries and geographies. By aligning investor and business objectives with integrated water management, we can turn things around and achieve universal access to clean water in the coming decade.

What actions have you committed to in this Decade of Action?

Thomas Schumann is the founder of Thomas Schumann Capital® (TSC) is the only sponsor for investable indices and products for water security and responsible investing. TSC’s solutions enable investors to integrate water risk into investment decisions to achieve sustainable performance, positive impact, water stewardship, and engagement, fast-tracking the path to a water-secure world. 

Markus Barth is an index pioneer who has designed, developed highly successful investable indices throughout his over 30 years career. In 2007, Markus developed the first-ever climate-focused investable indices that included proprietary valuation metrics to ensure both a low carbon footprint and attractive valuations.

Teresa Russell is a sustainability communications expert with an MS in global sustainability science and BS in finance. She provides business services to mission-driven companies and collaborated with the Frankfurt School of Finance & Management to develop the Strategic Development of Sustainable Financial Investments workshop.

Climate change is devastating the world’s water supplies. Why aren’t we talking about it?

by Thomas Schumann, founder of Thomas Schumann Capital®, the only solution provider at the nexus of U.N. Sustainable Development Goal 6 — "Water Security" — and responsible investing.

Climate-linked droughts and water contamination are often overlooked. The private sector needs to do more to protect this precious resource.

As wildfires, hurricanes and other climate-linked disasters grab headlines, an impending climate catastrophe is often ignored, one which threatens the source of life itself: water.

Increasing global temperatures lead to more extreme rainfall patterns, which means certain areas experience more frequent flooding, while others endure prolonged periods of drought. These events affect access to water as well water quality, and they can devastate critical ecosystems. In North America, for example, scientists have predicted the second worst drought in 1200 years in the American Southwest and northern Mexico, while on the east coast, encroaching saltwater is wiping out whole forests of mangroves.

At the same time, water demand is projected to increase 50% by 2050 due to population growth and urbanization. More people will need water, and less people will have it.

This phenomenon is known as “water stress,” which occurs when water demand exceeds the supply. It is already prevalent around the globe and is projected to worsen in every continent by 2040.

The World Economic Forum calls the issue one of the greatest global threats of our time. Water crises threaten not only the livelihoods of individuals in high water stress areas but also the viability of entire food systems. Additionally, intergovernmental conflicts over water resources — such as with the Grand Ethiopian Renaissance Dam, which could throttle Nile waters to Egypt — are increasing as water becomes scarcer.

Water crises threaten not only the livelihoods of individuals in high water stress areas but also the viability of entire food systems.

The United Nations Sustainable Development Goals calls for a global transformation for people and the planet within the next decade. However, certain outcomes related to its Goal 6, which covers clean water and sanitation, are projected to fall short of the United Nation’s targets if stronger actions are not taken. That goal aims to “achieve universal and equitable access to safe and affordable drinking water for all” by 2030. However, the United Nations Development Programme estimates that 75% of the global population may live in water-stressed countries by 2025, and at least 1.8 billion people worldwide are still using contaminated drinking water sources.

Yet water is too often seen as a plentiful resource, and the market is too often left to self-regulate. This has resulted in mismanaged water resources and underinvestment in water risk solutions.

According to DWS Group, ESG (i.e. environmental, social and governance criteria) and other types of sustainable investment initiatives are imperative for mitigating climate change-linked water risk. The private sector must couple assets with their water impact to encourage integrated water resources management and help reduce water stress worldwide. Furthermore, water risk quantification and investor influence must be leveraged in the finance sector to create meaningful change towards sustainable development.

The private sector must couple assets with their water impact to encourage integrated water resources management and help reduce water stress worldwide.

Investment firms can define and quantify water risk and develop a corresponding framework to guide investors. DWS also recommends creating products with competitive fees that “truly address water and/or other ESG risks” to promote transformational investment.

On the flip side, investors can drive change from the inside out, so to speak, to demand these water risk products and metrics. But however the private sector approaches the problem, one thing is certain: Time is running out, and we must act now to help create a water-secure world.

Thomas Schumann

Thomas Schumann is the founder of Thomas Schumann Capital®, the only solution provider at the nexus of U.N. Sustainable Development Goal 6 — "Water Security" — and responsible investing. A native of Frankfurt am Main, Germany, Thomas is a pioneer in sustainability. During his 36 year career, he has served in the German Air Force, pioneered a German market for recycled Levis jeans, introduced an international brand to a global FMCG industry, and supported the growth of a Los Angeles bank. In 2011, Thomas discovered his passion for water. Supporting water technology companies and the financing needs of large-scale California desalination projects, he helps global capital markets integrate water risk into investment decisions and provides insights, thought leadership, and investable products to mitigate financial climate and water risk.

About Thomas Schumann Capital®

Thomas Schumann Capital® (TSC) is the world's leading solution provider for investable indices and products that track global water risk. TSC is the sponsor of the world’s first benchmark index series tracking water risk in securities and across asset classes due to their exposure to water and climatic extremes. For more information visit: