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Use World Water Day to think about global water challenges

August 23, 2019 — In this Q&A, the Eaton Vance floating-rate loan team offers its perspective on today’s loan market.

By: Craig P. Russ; Andrew Sveen, CFA; Ralph Hinckley, CFA; Christopher Remington

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By Jade HuangPortfolio Manager, Calvert Research and Management

Washington - World Water Day provides an opportunity to highlight the vital role water plays in all aspects of our lives - and the urgent need to address the world's critical water challenges. While many of us enjoy a morning cup of coffee, for a significant portion of the world's population, access to clean drinking water is a constant concern. Globally, water-resource management and improved water supplies are critical elements in growing economies and reducing poverty.

The World Economic Forum, in its Global Risks annual report, consistently names water security as a top global risk in terms of potential impact, citing growing global water demand and associated effects on food and energy prices. Cascading to the private sector, risks associated with water are impacting business bottom lines and strategic-planning decisions.

Calvert World Water Day

A multi-dimensional issue

The questions around who has water and who doesn't—or who controls access to clean water and what it costs—raise issues with deep economic, political and social implications. Asia, for example, has 60% of the world's population, but only 36% of its water supply.1 China, India, and Mexico are all experiencing severe water stress from growing industrialization. Almost every major river system on the planet is shared by two or more nations, making water a source of potential international conflict and a matter of national security. In addition, serious infrastructure issues threaten water supplies and distribution. Water is clearly not a stand-alone issue, but must be considered in relation to commerce, land use, human rights, environmental protection and climate change.

Water scarcity and stress

More than a billion people currently live in water-scarce regions, and as many as 3.6 billion (nearly half the global population) could experience water scarcity by 2025.2 A UN report echoes these concerns, noting "by 2025, two-thirds of the world population could be under water-stress conditions." Water scarcity has been exacerbated by rapidly growing urban areas and industrializing regions, and these trends are likely to continue for the foreseeable future.

Water pollution threats

Only 2.5% of water on Earth is freshwater, 30% of which is designated as easily accessible. Beyond the fiscal and geographic constraints of installing infrastructure to transport this freshwater to end users, industrial discharge, agricultural runoff, domestic waste, chemical contaminants and sewer infiltration are increasingly polluting freshwater sources, highlighting the need for responsible water management by the public and private sectors.3

Although water-intensive industries support much of the world's workforce, they are also a major source of pollution. UN-Water's World Water Development Report 2016 reports that half of the global workforce is employed in eight water- and natural resource-dependent industries: agriculture, forestry, fisheries, energy, resource-intensive manufacturing, recycling, building and transport. Not only are these industries highly water-intensive, they also pose risks to contaminating freshwater sources through wastewater from operations.

Water and climate change

The nexus among food, energy and demand for water is intricately linked to the threat of climate change. Climate change is predicted to have numerous adverse effects on freshwater resources, rendering many available water supplies far less reliable. Severe droughts threaten water reservoirs and snowpacks around the world, impacting the sources of water for millions of people globally. This clearly has not only economic implications but social, political and humanitarian ones as well. Technological innovation will be key in finding solutions that counter the growing and imminent threat to many regions' access to water.

Responsible investors as part of the solution

Water access and water quality are near- and longer-term risks that Calvert prioritizes in both our investment research and investment philosophy. Via our Calvert Global Water Index and Global Water Fund, we take a solutions-oriented approach, seeking to invest in companies that are proactively working to address global water challenges all along the water value chain.

Calvert Research and Management evaluates many issues around water scarcity, water quality and access to clean water across four key areas:

  • Water utilities and distributors: Responsibly deliver and provide clean water at affordable rates, which we view as essential for economic growth and development.
  • Water technology: Have proven or emerging technologies that test, monitor or improve the quality of water, or address the efficient use of water, helping reduce consumption globally.
  • Water infrastructure: Are addressing the growing and urgent need to invest in the rehabilitation of aging infrastructure or expand infrastructure in order to deliver clean water to communities and drive economic growth.
  • Solution providers: Are leading their peers in water efficiency and reuse practices in the most water-intensive industries, effectively reduce overall water demand.

Furthermore, we look at companies providing unique, innovative solutions to global water challenges that actively address water issues outlined in the 17 United Nations Sustainable Development Goals and contribute to poverty alleviation and sustainable development.

Bottom line: Calvert seeks to offer investors the opportunity to be part of the solution to addressing water crises around the world through our global water strategies.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.