Norway's state pension fund, recently ranked the largest sovereign wealth fund in the world, cautioned on Wednesday that water scarcity poses a growing risk for an increasing number of firms it invests in.
"Water was an important input and output factor at 865 companies the fund was invested in with 255 billion kroner ($47bn) at the end of 2010," the Norwegian fund said in a statement at the World Water Week conference in Stockholm.
The fund, which contains nearly all Norwegian state revenues from the country's lucrative oil sector, invests in about 8,400 companies worldwide and was worth some 3.01 trillion kroner at the end of last year.
"Water is an important input factor at many of the companies the fund invests in but water is not an infinite resource," Magdalena Kettis, who is head of social and environmental issues for the fund, said in the statement.
"On the contrary, water may become an increasing cost that hurts profitability at many companies. This may in turn affect the fund's investments," she said.
The fund, which was created in the beginning of the 1990s to help finance Norway's generous welfare state system once the oil wells run dry, said it had for the first time conducted an evaluation of companies' water management risk reporting, assessing how 432 of the firms it invested in last year fulfilled nine criteria for reporting on water-related risks.
"The companies scored an average 2.7 out of a maximum nine points. A total of 131 companies scored zero, while 10 companies got top marks," the fund said.
According to Kettis, the results show that "far too few companies provide adequate information on water as a risk factor, particularly in their supply chains."
The fund concluded that "companies with inadequate water management face significant operational risks such as supply interruptions and higher treatment costs," pointing out that poor water management can also "lead to liability for damages or the loss of licences and permits.
"Access to the quantity and quality of water needed for production, as well as more stringent requirements for wastewater emissions, may impact the results of an increasing number of companies in the future," it said. -AFP