The pol­i­tics of wa­ter

Ig­nor­ing the scarcity of the most im­por­tant com­mod­ity in the world could be a huge mis­take Garry White

The Daily Telegraph - Business - - Front Page - GARRY WHITE

Fund gi­ant Black­Rock ar­gued this week that in­vestors were over­look­ing the risk of wa­ter scarcity and the im­pact it could have on their in­vest­ment port­fo­lios over the next 10 years.

Com­pa­nies in wa­ter-stressed lo­ca­tions may need to spend more to source wa­ter, raise their wa­ter ef­fi­ciency and meet more strin­gent en­vi­ron­men­tal reg­u­la­tions. But per­haps the most dra­matic im­pact of loom­ing wa­ter scarcity is the dis­putes it is cre­at­ing be­tween and within na­tions. Is all this talk of wa­ter wars some­thing that re­al­is­ti­cally needs to be con­sid­ered within the Square Mile?

Dis­putes about wa­ter are as old as hu­man his­tory and the ma­jor im­pact will be geopo­lit­i­cal. The first recorded wa­ter war oc­curred more than 4,500 years ago in mod­ern-day Iraq, near the con­flu­ence of the Ti­gris and Euphrates. That’s be­cause wa­ter is with­out doubt the most valu­able com­mod­ity on the planet – more sig­nif­i­cant than gold or data – be­cause we die in about four days if we can’t get a drink.

Calls for Egypt to de­clare war on Ethiopia were dis­missed this week by pres­i­dent Ab­del Fat­tah el-Sisi, as he keeps seek­ing a diplo­matic so­lu­tion to the is­sue of the Grand Ethiopian Re­nais­sance Dam (Gerd), which has been in constructi­on since 2011.

Egypt ar­gues that the dam will in­hibit its share of the down­stream wa­ter sup­ply from the Nile – and an agree­ment seems far from be­ing reached. Nei­ther coun­try came to an agree­ment as ten­sions es­ca­lated dur­ing the lat­est round of talks, spon­sored by the African Union ear­lier this month. Now the dam has been filled with 173bn cu­bic feet of the Blue Nile’s wa­ter af­ter this sea­son’s rains and Don­ald Trump is me­di­at­ing be­tween the two par­ties.

US Congress has even in­tro­duced a bi­par­ti­san amend­ment to its an­nual de­fence au­tho­ri­sa­tion bill call­ing on “Egypt, Ethiopia and Su­dan to im­me­di­ately reach a just and eq­ui­table agree­ment re­gard­ing the fill­ing and op­er­a­tion of the Grand Ethiopian Re­nais­sance Dam”.

Amer­ica is also in the mid­dle of its own dis­pute over wa­ter. Law­suits have been filed in the US as the state of Florida is ac­cus­ing neigh­bour­ing Ge­or­gia of tak­ing so much wa­ter that it will lead to “doom” for part of the state. “Deny­ing Florida re­lief not only would spell doom for Apalachico­la, it would set the bar so high for an eq­ui­table ap­por­tion­ment that it would ef­fec­tively in­vite states to raid wa­ter as it passes through their bor­ders,” Florida lawyers said in a US Supreme Court doc­u­ment filed on Mon­day. The US is see­ing many other wa­ter dis­putes, par­tic­u­larly in the south west in places such as Las Ve­gas.

But per­haps the great­est near-term sig­nif­i­cance of wa­ter con­flicts is part of larger geopo­lit­i­cal fights. The tech­no­log­i­cal Cold War be­tween Bei­jing and Washington has spilt over into a power bat­tle over wa­ter, with the Mekong River once again be­com­ing sig­nif­i­cant in the race for su­pe­ri­or­ity be­tween East and West.

China’s 11 dams on the Mekong have given it ex­ten­sive con­trol of the wa­ters that ul­ti­mately flow down to Laos, Myan­mar, Thai­land, Cam­bo­dia and Viet­nam. In late 2019, the river started to run dry down­stream. Th­ese coun­tries de­pended on wa­ter from the river for agri­cul­ture and fish­eries – with Laos also us­ing it for hy­dropower.

Short­ages of wa­ter also threaten public health, pro­duc­tion fa­cil­i­ties and global sup­ply chains. In­deed, many technology com­pa­nies have been mov­ing their op­er­a­tions to places such as Viet­nam as the US ad­min­is­tra­tion con­tin­ues its trade dis­pute with Bei­jing. Thai­land, a ma­jor sugar ex­porter, is ex­pected to pro­duce up to 30pc less sugar than in pre­vi­ous years be­cause of the drought. In Viet­nam, the dry­ing up of the Mekong has re­sulted in salt­wa­ter in­tru­sion dam­ag­ing rice fields, hit­ting vi­tal crops.

An Amer­i­can, 28-year study re­leased in April blamed the se­ries of re­cently con­structed up­stream Chi­nese dams for the record-low lev­els of wa­ter seen at the end of last year in the down­stream re­gion of the Mekong. China is also ac­cused of di­vert­ing wa­ter that can be used in fu­ture hy­dro­elec­tric projects. Of course, Bei­jing in­sists this is non­sense. China is try­ing to ex­tend its geopo­lit­i­cal in­flu­ence through projects such as “Belt and Road” and even pro­vid­ing fund­ing to coun­tries to help deal with Covid-19. Just this week Bei­jing agreed a $1bn (£760m) loan to Latin Amer­ica and the Caribbean to help deal with the fall­out of the cri­sis. China has been ac­cused of us­ing its financial fire­power to bring coun­tries into its sphere of in­flu­ence and the weapon­is­ing of wa­ter in the Mekong can be seen in this con­text.

In­vestors there­fore need to con­sider wa­ter scarcity in their in­vest­ment de­ci­sions – and this will be­come a sig­nif­i­cant fac­tor in scor­ing com­pa­nies for eth­i­cal, so­cial and gover­nance (ESG) in­vest­ing.

It mat­ters be­cause, as more in­vestors choose ESG bench­marks over tra­di­tional in­dices, the dif­fer­ence be­tween be­ing an ESG “win­ner” and “loser” could be­come much more mean­ing­ful. As de­mand wanes for shares in com­pa­nies that do not meet th­ese cri­te­ria and in­creases for those that do, there is a real in­cen­tive to take th­ese is­sues into ac­count when in­vest­ing your hard­earned money. Sup­ply chains are be­com­ing an in­creas­ingly im­por­tant area of con­cern.

Geopol­i­tics is also be­com­ing in­creas­ingly im­por­tant to com­pa­nies with long sup­ply chains or a global reach of cus­tomers. The new Cold War be­tween China and Amer­ica is a bat­tle for re­sources and in­flu­ence – and wa­ter looks likely to play a grow­ing part as the global pop­u­la­tion booms in the hot­ter parts of the world at a time when droughts are com­mon.

Black­Rock is right. In­vestors need to con­sider the fu­ture of wa­ter when choos­ing a com­pany for in­vest­ment. Ul­ti­mately, it may be ex­pen­sive not to do so.

‘Wa­ter is the most valu­able com­mod­ity on the planet’

A Cam­bo­dian woman wash­ing up in the Mekong: Chi­nese dams threaten the river’s wa­ter flow

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.