NEW YORK (March 22, 2022) — ISS ESG, the responsible investment arm of Institutional Shareholder Services Inc. (ISS), today announced the launch of the ISS ESG Water Risk Rating on World Water Day. World Water Day, supported by the United Nations, celebrates the importance of water to global society, and highlights the plight of the two billion members of the global population who currently live without access to safe water. Freshwater resources have come under increasing pressure due to population growth, climate change, and unsustainable production and consumption patterns. In addition to the humanitarian and environmental impacts, the water crisis constitutes an economic risk with implications for the business community and its investors.
Institutional investors can mitigate water risks across their investment portfolio by identifying industries and business activities that depend on or greatly impact water resources, and by actively engaging with company management to improve transparency with regard to water-related strategy and risk management. The ISS ESG Water Risk Rating offers a holistic solution to support a range of investor use cases. This includes helping investors identify and manage freshwater-related risks in portfolios, build freshwater-focused portfolios, funds and indices, through to supporting their water-related stewardship and engagement programs.
The ISS ESG Water Risk Rating features a holistic and granular assessment of a company’s exposure to and management of freshwater-related risk comprised of 11 data points per company. Its distinct methodology for assessing companies’ freshwater risk exposure and management provides an aggregated score based on two complementary pillars. The first pillar, a Water Risk Exposure Classification (WREC) is a classification of a company’s individual exposure to freshwater-related risks based on its industry assignment, its geographical footprint of its own operations, and its industry classification regarding supply chain risks. The second pillar, a Water Risk Management Performance Score (WRMPS), is a metric for the current water-related operational performance of a company, taking into account its risk management practices along the value chain as well as its potential involvement in controversies. The Water Risk Rating runs on a scale from 0 to 100, capturing a range from significant unaddressed risks to negligible and/or well-managed risks.
Initial coverage consists of approximately 7,400 companies globally, and is powered by ISS ESG’s Corporate Rating, Norm-Based Research, SDG Solutions Assessment, as well as data on baseline water stress from the World Resource Institute (WRI) Aqueduct Water Risk Atlas.
To further support investors seeking to improve their portfolio’s water impact, ISS ESG’s Thematic Engagement Solution enables participation in joint outreach and dialogue with a select list of target companies. The Water Thematic Engagement, which aims to encourage companies to improve their transparency around water-related strategy and risk management through the disclosure of key metrics and targets, focuses on laggards in two industries with high water-risk exposure in both their supply chains and direct operations according to ISS ESG’s Water Risk Rating: Chemicals, and Textiles & Apparel. Thirty companies are targeted for engagement for an engagement cycle of two years.
Dr. Maximilian Horster, Head of ISS ESG said: “On World Water Day, ISS ESG is pleased to launch its Water Risk Rating, which provides a holistic assessment of companies’ overall freshwater-related risk, to support investors seeking to improve water-related stewardship and risk management.”
About ISS ESG
ISS ESG solutions enable investors to develop and integrate responsible investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions. It also provides climate data, analytics, and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes. In addition, ESG solutions cover corporate and country ESG research and ratings enabling its clients to identify material social and environmental risks and opportunities. For more information, please visit us at: www.iss-esg.com
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