One expects hedge funds to carefully audit their use of leverage, and one expects
companies in water-intensive industries such as mining to carefully audit their
use of water.
And one would be wrong on both counts. In the wake of a Deloitte report
saying that hedge funds are very bad at managing risk, comes a comprehensive
report from Pacific
Institute making similar claims about water reporting.
The report’s authors looked at 139 large public companies in water-intensive
industries, and found no standardization in water reporting, which makes apples-to-apples
cross-company comparisons impossible. They also found precious few company water
policies; very little cognisance of water risks; and almost nothing in the way
of site-specific water information.
Now I’m not sure that all this information necessarily needs to reside in companies’
annual reports. But it should certainly reside somewhere, and I’m pretty
sure that if it’s not in the annual report, that’s a good sign that the company
simply doesn’t have the information at all.
Mari Morikawa, the lead author of the report, is quoted in the press
release:
This analysis shows that companies aren’t providing risk-relevant
information to investors and stakeholders. It may also indicate that some
companies and sectors are failing to pay attention to their most important
water risks.
Maybe better water reporting is something that socially responsible investors
should start demanding from companies they invest in.