• Erste Asset Management has published the water footprint of its sustainable funds since 2017
• Availability of water data has greatly improved since then
• World Water Day on 22 March

This is the seventh year that Erste Asset Management (Erste AM) has published the water footprint of its sustainable equity funds. Since 2021, this disclosure has been complemented by the publication of the data for our sustainable bond funds. With climate change, droughts and water shortages have also arrived in Europe. The topic of water and how companies manage their water risks is therefore also becoming increasingly important in an investment context.

Water shortage is also becoming an issue in Europe

“Water is much more than a vital resource,” emphasises Walter Hatak, Head of Responsible Investments at Erste Asset Management. The resource is also of enormous importance from an economic point of view. The far-reaching effects of the water shortage became clear once again last year. If the rivers do not carry enough water, cargo ships get stuck. Even nuclear reactors cannot continue to operate because they cannot be cooled sufficiently.

For companies, a water shortage can have a wide variety of consequences, such as stricter regulation of water consumption, massive price increases or delays in the production process. This highlights the fact that water risks are also economic risks. It is therefore all the more important for companies to use our water resources responsibly and manage water risks sustainably.

“Water shortages and the progressive lowering of the groundwater level – problems that a few years ago we only knew from documentaries about distant countries – have meanwhile arrived here, where in rural regions the domestic wells that have existed for generations are increasingly drying up, thus drastically demonstrating the consequences of the climate crisis,” emphasises Walter Hatak. 

Regional component as decisive factor

“By publishing the water footprint of sustainable equity funds for the first time in 2017, Erste AM once again lived up to its pioneering role,” Hatak emphasises. In the meantime, the disclosure of water risks has been regulatorily defined. Within the framework of the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, these are calculated and published by investment companies as part of the so-called additional principal adverse impact indicators.

As for the availability of water data in the sustainable Erste AM funds, more and more companies have started to disclose their water consumption. Availability has increased from 46.8% in 2017 to 73.0% now.

It is important to understand that not only the actual consumption in absolute terms plays a role in possible water risks. Unlike the carbon footprint, the regional component is crucial. “Water consumption in regions with high water resources, such as in the area of the Alps, is to be classified differently than water consumption and related management practices in water-scarce regions, such as in Cape Town in South Africa,” Hatak points out.

Taking into account water risks in investment

Erste AM follows the risk classification of the World Resources Institute and distinguishes between low (e.g. Austria in the Alps), medium (e.g. Germany) and high (e.g. Spain) stress regions. In the course of the sustainability analysis, Erste AM records whether a company is located in a low-water risk region and whether it is dependent on high water withdrawals there. In addition, Erste AM's sustainability experts assess what measures companies take to improve water use. These aspects are accounted for in the calculation of the ESG rating of the companies, which among other things is decisive for whether a company is included in the fund or not.

The consideration of water risks in the selection of assets is proving successful. This year, Erste AM's sustainable funds again significantly outperformed the global equity market in terms of water footprint. 

Note: The chart shows the water footprint of selected funds. For the complete overview of all sustainable equity and bond funds, please visit https://www.erste-am.at/en/private-investors/sustainability/responsible#wasserfussabdruck. 

About us:

Erste Asset Management (Erste AM) coordinates, and is responsible for, all asset management activities within Erste Group Bank AG. At our offices in Austria, Germany, Croatia, Romania, Slovakia, the Czech Republic, and Hungary, we manage assets of EUR 69,35bn (31.12.2022).

Legal notice: Forecasts are no reliable indicator of future performance. Please note that, in addition to the opportunities described, investing in securities also involves risks.

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