Water Risk: The real liquidity crisis BY MONIKA FREYMAN, IPE Real Assets, Nov/Dec 2018

November 26, 2018

With cities like Cape Town facing ‘day zero’ crises, Monika Freyman explains why investors need to be alive to water risks

Harvard’s $37bn (€32.5bn) endowment took a $1.1bn write-down last year after withering criticism about its farmland acquisitions and water-use practices in Brazil, California and other resource-sensitive regions. More mining projects in South America are being put on hold due to local water supply concerns. Large infrastructure projects in Africa are also under a microscope as the effects of drought deepen.

All of these examples highlight why investors need to focus on water risks and other sustainability concerns during due diligence. With climate and natural-resource pressures mounting, investors need to understand where future problems could arise and how they can reduce their exposure before making big investments.

Private-equity analysts Marc Robert, chief operating officer at Water Asset Management, and Jason Scott, managing partner of Encourage Capital were among a group of institutional investors who collaborated with Ceres to create the Private Equity Water Due Diligence Tree, a guide within the Investor Water Toolkit, to help investors determine whether there are ‘red flags’ related to water issues in a region or for a specific project.