It’s unclear who said it first, but it rings true: “if climate change is a shark, water is its teeth.” Climate change poses a wide set of physical risks to our systems, and water challenges are the way in which these risks manifest most acutely today. In the last two months, we have seen this play out clearly in the US, between drastic measures taken to reduce water usage from the Colorado River to prevent it from running dry to Arizona imposing limits on new construction due to limited water resources.
We at Galvanize are deeply committed to scaling solutions for the climate transition in this decade. But investing in climate adaptation in this decade is equally important, both to minimize the impacts of climate change as well as to build resilience across sectors. Managing and adapting to our changing water reality is a key pillar of climate adaptation.
To this end, we recently convened a roundtable on the intersections of water and climate stewardship, bringing together industry leaders, coalitions, investors and innovators across sectors facing these issues today. We see an opportunity to integrate learning and solutions across both movements. What has become clear to us is that as much as climate change is accelerating our water challenges, what is compelling and exciting are the many opportunities available today to scale solutions that address both.
Water risk is here today: The contours of our water crisis
Water is a foundational natural resource. It is an essential input into industry, energy and agriculture, sustains our natural ecosystems and enables our own physical health. Globally, we use over 4 trillion cubic meters of freshwater per year (or over 50 times the capacity of the Colorado river)1. Agriculture accounts for 70% of freshwater withdrawals, industry and municipal use for 20%, and energy for another 10%. 2
There are multiple dimensions to our water crisis. First, we face increasing water scarcity, where demand outstrips supply. Demand for water is only projected to increase, as we continue to scale our food and energy systems to support growing global populations and irrigation demand. Supply at the basin and sub-basin level are naturally finite, and supply is challenged through unsustainable withdrawal levels and volatile patterns of drought and flood. The UN projects a 40% gap between water demand and supply by 2030.3
Aggregate global gap between existing accessible, reliable supply and 2030 water withdrawals (Source: McKinsey)
Secondly, we face issues of water quality due to persistently extreme levels of water pollution. Some 80% of the world’s wastewater is discharged back into the environment, threatening our water resources and our ecosystems.4 Wastewater pollution is driven at all levels – by industry, agriculture and even individual households. And of course, these issues of water quality diminish usable water supply.
Climate change and water are inextricably linked
Climate volatility and temperature rise are compounding the water risks we face. Most visibly, climate change alters precipitation patterns, causing greater frequency and intensity of droughts in some regions and increased rainfall in others. This volatility makes it difficult to reliably capture and distribute water. 5
But climate change has many other equally tangible impacts. Rising temperatures are melting glaciers and reducing snowpack. Glaciers act as freshwater reservoirs; as they shrink, their reduced capacity impacts those communities and ecosystems relying on them during dry seasons. Climate change is also accelerating sea-level rise, which drives saltwater intrusion and contamination of freshwater resources; it increases water evaporation from surface water bodies and soils, exacerbating water scarcity; and it is altering our overall hydrological cycles, changing the timing and duration of the rainy season and impacting agricultural practices and water management systems.6
We can solve for climate and water – at the same time
Water and climate solutions represent wide-ranging categories, spanning measurement tools to efficiency measures to nature-based solutions. The ability to drive both aspects of resilience makes overlapping solutions all the more important and scalable today. We see several dimensions to this climate-water nexus:
- Water challenges are costly and immediate – and drive awareness of the urgency of the climate transition. In 2021, CDP estimated that over $300 bn of business value is at risk due to water security concerns7 and that over 87% of companies now undertake water-related risk assessments.8 Water availability poses an existential risk to businesses and communities, and motivates both near-term corporate action and in some cases a policy response.
- Managing water intelligently requires measurement and monitoring capabilities – which can piggyback on solutions used to track emissions and other sustainability factors. Advanced tools exist today to optimize decision-making, whether that be in industrial water usage or in-field water consumption. These technologies can support with not only identifying opportunities for better water management, but also tracking progress on a broad array of sustainability impacts, including carbon.
We are keen to help scale measurement processes and data infrastructure that can support both emissions and water tracking. We see several examples of this in our own portfolio: Arable, for example, provides crop monitoring solutions to gather ground truth data from the field, and supports not only insights into the carbon impact of given practices but also end-to-end water intelligence on growers’ water usage. Similarly, Worldly supports major brands, retailers and manufacturers in collecting data on operational and product impacts not only on carbon but also water, chemistry and labor.
- Solutions for climate are often also solutions for water – and those deploying these solutions can stack the commercial benefits of both aspects. There are myriad solutions that address both arenas: for example, deploying renewable energy substantially reduces reliance on water-intensive fossil fuels, explored thoughtfully here by the IEA. Regions like California and Finland which have studied the potential effects of a 100% renewable-powered grid estimate that this will reduce over 95% of water consumption from their regional energy sectors.9
Another key driver of water use reductions must come through sustainable agricultural practices. Regenerative agriculture, precision irrigation and other soil conservation measures can reduce water consumption, enhance soil moisture retention and sequester carbon; our portfolio company Regrow helps its customers stack these benefits in every deployment. These benefits apply more generally to scaling nature-based solutions – the same projects around wetlands and riparian restoration designed for carbon goals also enhance water quality, regulate water flow and reduce erosion. In all of these projects, the corporation or entity deploying a given solution can net the benefits across savings on water and energy use, potential carbon revenue and increased resilience.
- Corporate leadership on climate issues sets useful precedents for how to scale corporate action on water issues. Although the work is far from done, corporates have made substantial strides in establishing frameworks and processes for measuring GHG emissions, setting credible targets and developing climate action plans. This movement has acquired scale: Over 2,900 companies have set science-based targets, and nearly 40% of the Fortune 500 have set net-zero targets.10 These voluntary measures now inform regulatory requirements on measurement and disclosure (from the impending SEC guidance to the CSRD directive in the EU).
Corporate action on water is more nascent, but already leverages a similar pathway. Groups like the CEO Water Mandate, Alliance for Water Stewardship and Carbon Disclosure Project continue to refine how companies set water positive targets and track their progress. Ultimately, we hope to see standardized integration of metrics for adaptation and water risk management into corporate reporting frameworks – and we see a role for investors in pushing for robust disclosure and accountability.
- Finally, collective action efforts can combine water and climate priorities. There are many examples of NGOs, corporates and communities coming together to support critical restoration activities around over-stressed basins and watersheds that they jointly rely on. The regional nature of water risk makes it more apparent which parties should collaborate on a given opportunity. As data collection and measurement improve our ability to see emissions and water trends across supply chains, we wonder: how can we facilitate similar collective efforts around other types of “hotspots”?
We believe climate adaptation requires that we scale solutions for sustainable water management today. These are not two separate issues or movements but simply different aspects of one interdependent system – and we must measure, report on and scale solutions that take both dimensions into account.
1. Water: A human and business priority (McKinsey)
2. CEO Water Mandate
3. Global freshwater demand will exceed supply by 2030, experts warn (WEF)
4. CEO Water Mandate
5. Climate Change will affect global water availability through compounding changes in seasonal precipitation and evaporation
6. Explainer: How climate change is accelerating sea level rise (Carbon Brief)
7 Water risks to business five times higher than cost of inaction (CDP)
8 How North American companies are assessing environmental risk (CDP)
9 FSW Water Use in Renewables (Food and Water Watch)
10 Fortune Global 500 Climate Commitments, SBTs: Companies Taking Action