-WRI is an environmental think tank based in Washington DC -this project is housed within WRI’s body of research on capital markets, which has been around for about 10 years, though has been recently rebranded as “Envest” (i.e. the logo in the corner)
Envest is part of the markets and enterprise program We’ve recently re-branded to the Envest name, but as you can see, we’ve been at this a while Our objective is to bridge the environmental and financial through research and tools Our niche is Footprint vs Risk/Impact Mainstream audience Most of our research is done in partnership with major financial institutions and corporations, including APG, HSBC, Goldman Sachs, JPMorgan, Rabobank, Merrill Lynch
-The key thing to remember about water, which differentiates it from climate change, is that it is primarily a local issue -The sub-national map of water scarcity shows serious challenges today, intersecting with major economic and population centers. -
-hello and welcome -introductions - We are here to share lessons from a research collaboration between the World Resources Institute and HSBC’s Centre for Climate Change in the UK, which was funded by the IFC. The project gleans light on key environmental trends impacting Emerging Asia, but more importantly connecting these trends to economic sectors and how the value of companies in the region are likely to be affected by environmental trends. While the research and lessons identified focus on risks created by these trends, there are opportunities for companies and analysts who understand these trends and how companies can hedge themselves against, or find new market areas in light of these trends.
An HSBC analysis in India suggests that delays in project execution and loss of output due to water scarcity could be material. A 12-month delay in commercial operation results in the IRR dropping by nearly 1.50%. Each 5% drop in the plant load factor will result in nearly a 0.75% drop in the project IRR.
We are wrapping up a major project that we partnered with the IFC and HSBC
Thirsty Plants: The Impacts of Water Scarcity on the Food and Beverage and Power Sectors in Asia
Thirsty Plants: The Financial Impacts of Water Scarcity in Emerging Asia
A non-profit, independent research institute Mission : Move humankind to live in ways that protect Earth’s environment and its capacity to provide for the needs and aspirations of current and future generations. Protect Earth’s Living Systems Create Sustainable Enterprise and Opportunity Protect the Climate System Empower People and Strengthen Institutions World Resources Institute
“ Environmental Intelligence for Tomorrow’s Markets”
Presentation Overview <ul><li>Water Constraints in Emerging Asia </li></ul><ul><li>Food & Beverage Processing </li></ul><ul><li>Power Generation </li></ul>
Extreme Scarcity <500 Scarcity 500-1,000 Stress 1,000-1,700 Adequate 1,700-4,000 Abundant 4,000-10,000 Surplus >10,000 Ocean/ Inland Water No Data m 3 /person/year Sub National Water Scarcity 2025 With permission from Coca Cola Water stress and scarcity: the next big issue
SECTOR #2: Power Generation Over Heating: Water Constraints on Power Generation in Emerging Asia
Power sector is water dependent Range of Water Withdrawals and Consumption (US)
Water constraints already occurring in region Yet financial impacts limited by regulatory protections Vietnam, 2005 : Three months of drought and severe weather caused reduced power production at the eleven hydro plants resulting in a loss of 864 million kWhs. India, 2008 : Low monsoon rainfall led to hydro cuts in Kerala. India, 2007 : Heat waves resulted in power shortages as high as 20% in Maharashtra (and 9% across India as a whole). India, 2006 : Water shortages led to power cuts in Madhya Pradesh. India, 2004 : Floods forced the shutdown of a 1,500 MW hydroelectric plant for seven days due to high silt levels in Himachal Pradesh. Philippines, 2002 : NPC’s Angat Dam faced critically low reservoir levels due to an unusually long dry spell during an El Nino year. India, 2003 : Severely low rainfall caused a decline in hydroelectric power by 12.9%. Thailand, 2004 : Lack of rain reduced power generation in Thailand’s major hydroelectric dams during a period of high electricity demand, nearly causing Thailand’s electricity consumption to nearly outpace production. Thailand, 2005 : EGCO’s largest power plant, Rayong, came very close to running out of cooling water and shutting down in the dry season when cooling water reservoirs fell to only 9% of capacity. Vietnam, 2006 : Droughts caused a reduction of output of up to 200 million KWhs of electricity from key hydropower plants. Philippines, 2007 : Prolonged dry spell during rainy season forced NPC to shut down its hydroelectric Caliraya power plant . Vietnam, 2008 : Water scarcity forced EVN to open the floodgates of three hydro plants to supply water for agriculture equivalent to the loss of 430 million kWh of electricity . EVN lost US$380 million from buying power from more expensive sources.
Power sector making long-term bets on water availability India: 79% of planned capacity is water scarce or stressed
Looking ahead: A recipe for water risk 1. Water scarcity increasing 2. Fastest growing electricity appetite 3. Investors taking on more risk 4. Tradeoffs between environmental priorities
Financial Impacts could be significant Revenues COGS Project Execution Growth Load losses Outages Permitting Water allocations Financing Moratoriums New Regulations Financing IRR sensitivity to loss in plant load factor (%) IRR sensitivity to delay in commercial operations (months) Source: HSBC Source: HSBC
What can investors do? Water Risk Framework for the Power Generation Sector
What can investors do? Questions to Ask Companies About Water Security
Stay tuned for new research from WRI/IFC/HSBC Forthcoming <ul><li>Food & Beverage </li></ul><ul><li>Power Generation </li></ul><ul><li>Real Estate/Green Buildings </li></ul>
<ul><li>Amanda Sauer </li></ul><ul><li>World Resources Institute </li></ul><ul><li>[email_address] </li></ul><ul><li>tel: +1 202 729 7708 </li></ul>For more information: