The Water Risk Monetizer is a financial modeling tool that provides a new way for businesses to factor water scarcity into decisions that support business growth and help ensure the availability of fresh water for future generations.
Helping businesses understand water-related risks
Water scarcity is a major challenge for communities around the world. For businesses, it is increasingly a constraint to growth. Insufficient access to clean water can significantly disrupt operations, increase costs and curtail growth. Failure to manage water-related risks can result in reduced revenues, higher operating costs, and lower investor confidence that can restrict access to capital, or result in higher financing rates or higher insurance premiums. It can also have significant implications on local communities.
Despite increasing risks, water is significantly undervalued in much of the world. The disconnect between market price and risk makes it hard to make for businesses to make the business case to invest in effective water strategies to protect against water-related business challenges, or to make optimal decisions about where to locate or to expand operations.
In order to make more informed, responsible decisions about water use, businesses need to better understand the impact and associated costs of water-related risks at the site level, as well as the broader implications of business operations to the surrounding community.
Quantifying water-related risks in financial terms that make business sense
The Water Risk Monetizer is an easy-to-use financial modeling tool that helps businesses assess water-related risks in financial terms based on readily available information about water use, water costs, revenue and production projections at individual facility and enterprise levels.
The Water Risk Monetizer uses scientific models developed by Trucost to quantify the potential impact of water scarcity on a facility in monetary terms. The model correlates local water scarcity to considerations that contribute to the full value of incoming water, based on scarcity, for a specific facility.
The tool provides actionable information to help businesses:
- Assess water scarcity risks at site and/or enterprise level
- Understand the full value of water to a business
- Calculate potential revenue at risk
- Quantify water-related risks in financial terms that make business sense
The Water Risk Monetizer provides directional guidance in the form of:
- Risk-adjusted water cost: monetary estimate of the full value of water at a facility level, based on what water would cost if supply and demand were accurately reflected.
- Potential revenue at risk: estimated amount and likelihood of the revenue that could potentially be lost at a facility due to the impact of water scarcity on operations.
Informing decisions that enable growth
The information provided by the Water Risk Monetizer can be used to help businesses around the world understand water risks and the potential cost implications of water scarcity for a particular facility. The data provides valuable information to help assess different business models, determine how water costs or scarcity may affect growth plans, and help inform business goals. The information makes it easier to factor the potential cost or impact of water risks into business decisions in the same way other risks are considered in business planning and capital allocation.
Businesses around the world can use the Water Risk Monetizer to:
- Incorporate a risk-adjusted cost of water into a facility budget, financial projections, business scenarios, project proposals, etc.
- Make the case for proactive water management strategies (solutions, technologies, programs, etc.)
- Identify operations/locations at greatest risk
- Monetize rate of return for water management improvement projects
- Select where and how to increase production or meet demand in new regions
The Water Risk Monetizer does not predict whether water risks will be realized by the water user. The water risk premium and revenue at risk assessment should be used as data points in a comprehensive risk assessment process and are intended to be refined based on local conditions and business particulars.
Developed by Ecolab and Trucost Plc.
The Water Risk Monetizer was developed by Ecolab, the global leader in water technology and services, and Trucost, a global leader in valuing natural capital. Ecolab and Trucost are committed to advancing the principles of water stewardship by increasing understanding of global water risks and helping others make the business case for responsible water use.