Water has always been essential both for human life and for economic activity. Its importance has been overtaken in recent years by the issue of CO2 emissions, but corporate water use and conservation is again becoming a critical concern for investors.
Water is a strategic asset for general sustainable development and therefore La Financière Responsable (LFR) is committed to selecting quality companies that take this environmental issue into account. Through its Ecosocial Footprint® analysis, LFR records how much water is used by the companies, drawn from the CAC 40 and Eurostoxx 50 indices, in its investment portfolios.
More firms than ever before are becoming aware of water consumption and reporting on it. Some 77% of the companies in the LFR Euro Développement Durable fund now disclose their water use, compared with 62% in 2012. These selected firms consume five times less water than those of the Euro Stoxx 50 companies, and eight times less than stocks in the CAC 40 index. This highlights how important water consumption is to selection of stocks for the LFR portfolios, however important each might be to their industry sector.
LFR considers water use alongside economic growth, of course. The companies included in the LFR Euro Développement Durable fund all demonstrate responsible water use patterns: compared to the turnover for the whole portfolio, consumption shows a commendable 40% water saving from 2010 to 2016.
Investors also need to analyze the management of the water cycle in companies, a major issue which is also very difficult to measure. Some companies make a real effort in their water reporting and conservation, but they are still in the minority. For LFR, improvement in the performance and reporting of water use is necessary, as the Sustainable Development Goals advocated by the United Nations become a more important factor among investors around the world.
Chart : Water consumption among LFR-held stocks compared to selected Indices
La Financière Responsable is a specialist ESG asset manager with an award-winning approach to integrating financial and extra financial analysis. Investors and analysts are sometimes unsure as to what constitutes extra financial information, and how it should be interpreted. Drawing from its Ecosocial Footprint (Empreinte Ecosociale®) database, LFR is publishing a series of Blogs showing how selected ESG indicators are defined, what they represent and how they are interpreted. LFR is also ready to engage with interested parties on any aspect of this analysis.