• Erste Asset Management has published its first water footprint for its sustainable equity funds
  • Water shortage among the top five most salient risks worldwide
  • Regional distribution of water consumption is crucial

Erste Asset Management (Erste AM) is assuming a pioneering role by publishing the water footprint of its equity funds, in line with the CO2 footprint: the responsible use of water is to become more important as a result of the pressure exerted by investors. This comes with two benefits: by taking into account this aspect in the selection process of securities, fund managers can reduce both water risk and the connected water footprint.

Drought, poverty, and flight

Clean drinking water is a dwindling good. The World Economic Forum rates a global water crisis as fifth-biggest risk for the coming years.

"Local freshwater shortage is a risk with social consequences. Water shortage can make entire regions uninhabitable and force people to flee. Access to water is thus becoming more and more important on a global scale."


Walter Hatak, Sustainability Expert Erste AM

According to the World Resources Institute, every seventh person today lives in a region with scarce water resources. By 2025, this number could increase to 3.5bn, i.e. to almost half the world’s population. Pollution and the resulting threat to freshwater springs is one of the most frequent reasons for water shortages.

Pioneering work in the field of water footprints

The models that facilitate the establishment of the water footprint uses the volume of water used and reported by companies as input variable for the calculation of water intensity. “We are pioneers in this field. In order to ensure a reliable set of data, we take into account only those data that have been supplied by several providers. Data available for less than 80% of relevant business activity are not used in the model,” explains Hatak. 

“Even though our water data currently only cover about half of our equity holdings, it is important for us to promote the availability of reliable water data. We achieve this goal on the one hand by publishing the water footprint itself, and on the other hand by entering into an intensive dialogue with our research partners,” as Hatak points out.

Water footprint at 9.4mn litres of water per USD 1mn in sales

On the basis of the calculations of the ESG Research Team of Erste AM, the water use of a global, listed company amounts to 9.4mn litres of water (about 9,400m3) per USD 1mn in sales.
 

Region                                   Water intensity in m3/USD in sales

Global equities                       9,399

North American equities        14,997

European equities                  2,856

Sources: data provided by Bloomberg, MSCI ESG, Institutional Shareholder Services Germany AG; calculations by Erste AM, water and sales data FY 2014-2017; values weighted by MCap

Location, location, location

Whereas every tonne of CO2 emitted or saved makes a global difference, water shortage is a local problem. “The relevant unit is therefore every regionally confined water catchment area,” explains Hatak. The water footprint sorts the regions of business activities in terms of water stress level from low to high. The higher the stress level, the higher the water risk.

For example, fruit cultivation in the Austrian region of Wachau (Lower Austria) is safe, whereas in the dry regions of California it is problematic. “Water consumption first has to be allocated to the region where the company operates in order to assess the risk of water shortage,” concludes Hatak.

 

For the ERSTE RESPONSIBLE funds, the establishment of water risk represent an important part of sustainable company (e)valuation.

To this end, the regional operations of the company, the dependence on water use, and the measures aimed at improving sustainable water consumption are taken into consideration.

For example, the water intensity of our flagship fund ERSTE RESPONSIBLE  STOCK GLOBAL is only 37% of that exhibited by the global equity index.

 

You can also take a look at our ESGenius-Letter on the topic of water: 

For further queries please contact:

Erste Asset Management, Communications & Digital Marketing

Paul Severin
Tel. +43 (0)50 100 19982
E-Mail: paul.severin@erste-am.com

 

Erste Asset Management GmbH
Am Belvedere 1, A-1100 Wien
www.erste-am.com
Sitz Wien, FN 102018b,
Handelsgericht Wien, DVR 0468703

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. All data is sourced from Erste Asset Management GmbH, unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to Art 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the  web site www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.

The issue and redemption of unit certificates and the execution of payments to unit holders has been transferred to the Fund's custodian bank/depositary, Erste Group Bank AG, Am Belvedere 1, 1100 Vienna, Austria. Redemption requests can be submitted by investors to their custodian bank, which will forward them to the Custodian Bank/Depositary of the Fund for execution via the usual banking channels. All payments to investors are also processed via the usual banking clearing channel with the investor's custodian bank. In Germany, the issue and return prices of shares are published in electronic form on the web site www.erste-am.com (and also at www.fundinfo.com). Any other information for Shareholders is published in the Bundesanzeiger, Cologne.