Financed water consumption: Assessing portfolio-level risk
Financial institutions may have a new metric to help determine whether their financial commitments expose them to high water-related risks.
Summary
- Intensive water use is increasingly recognised as financially material due to its impact on corporate economic operations.
- A pilot programme suggests that financed water accounting, using financed water consumption as a metric, could form a consistent approach to assessing the level of water-related risk across financial portfolios.
Water scarcity is an increasingly significant factor in financial decision-making. It can affect corporate operations, supply chains, and risk profiles for financial institutions. Yet currently there’s no consistent, practical approach to assess water use as a risk factor.
To support financial institutions in gaining insights into their exposure to water-related financial risks, the Water Footprint Network developed a methodology for allocating water consumption to financial portfolios. Five global financial institutions voluntarily participated in a pilot programme to test the methodology from November 2025 to June 2026.
Programme results demonstrate that this methodology could be used for:
- Identifying water-intensive sectors and portfolio hotspots
- Improving clarity on exposure to water scarcity risks
- Engaging with clients on water scarcity issues and guiding investment decisions
At the same time, pilot insights revealed the limitations of these efforts due to varying data availability, quality, and geographic detail—particularly for assessing local water stress. And while financed water accounting can identify exposure to water-intensive activities, it can’t yet measure total water-related risk.
To share these findings, a white paper titled “Financed Water Consumption” was developed through a collaborative effort between Guidehouse, the Water Footprint Network, and MSCI, with valuable input from the participating financial institutions in the pilot.
The white paper advances the discussion on measuring financial portfolio-level water consumption by supporting further methodological development and more granular corporate water disclosures. The paper also establishes a foundation to better understand water-related impacts and risks across portfolios by developing more robust methodologies that combine water consumption with location-specific context.