Ostrum engaged in addressing water risks in agricultural supply chains
Ostrum AM has reiterated its commitment to promoting the responsible use of world fresh water resources in agriculture, in keeping with its UN PRI pledges (UN Principles for Responsible Investment), to which it has been a signatory since 2008.
A first phase of engagement on this issue got started in 2014, and the PRI published a guide devoted to this matter in coordination with the WWF – Engagement on water risks in agricultural supply chains: investor guidance document. By 2017, 84% of companies involved had improved disclosure on management of water risks in agricultural supply chains. However, a great deal of work remains to be done.
Agriculture still currently remains the heaviest user of fresh water supplies, responsible for approximately 70% of the world’s fresh water consumption. Global fresh water supplies have become increasingly exposed to risk as a result of both growing demand, and pressures on supply, including those linked to climate change.
Traditionally, businesses have focused on their direct water consumption, although many have failed to recognize the importance of understanding and managing risks throughout their supply chains. Companies who fail to manage supply chain water risks may see impacts on their performance such as increased input prices1, disruptions in supply or reputation damage.
The PRI published a guide in coordination with the WWF - Engagement on water risks in agricultural supply chains: investor guidance document. The engagement is now moving into a second phase, using the results of phase 1 to focus on companies where progress is still deemed insufficient, with the following aims:
- ensure that companies identify water supply risks and impacts in their agricultural chains and prove their knowledge on the issue;
- encourage companies to implement appropriate policies and measures to restrict and manage water supply risks and their effects;
- encourage companies to publicly disclose these risks and the progress made towards finding solutions.
Companies selected achieved poor results during the first phase of engagement, while others have displayed progress that requires additional investor engagement, so it is vital to increase dialogue between companies and investors on these key issues. As with the various other issues it engages in, Ostrum AM plans to make a full contribution to this change.
1 Inputs are the various products added to land and crops that are not derived from farming or from the surroundings. Inputs are not naturally present in the soil, they are added to improve crop yield.