In January 2010, investment banker Goldman Sachs, along with General Electric and a high-powered Washington thinktank called the World Resources Institute (WRI), announced the launch of a new index measuring water-related risks facing companies and their investors.
In the words of their corporate news release: ‘In many regions around the world, water scarcity from climate change and pollution is starting to impact a company’s performance, yet few analysts account for water-related risks.’
This new water index would ‘draw on publicly available data regarding physical scarcity and water quality and overlay factors including the regulatory regime and social and reputational issues’ in various regions of the world.
Business jargon aside, if you think this will be a useful tool for corporations, you’d be right. In fact, the risk-index might more accurately be called an ‘opportunity-index’ for water speculators and investors.
Next year the water privatization market worldwide is expected to reach $1 trillion. As Goldman Sachs puts it, ‘There is no substitute for water. It is the only utility you ingest.’ According to Maude Barlow, a leading Canadian critic of water privatization, ‘The biggest water company of all is General Electric.’
By August 2011, Goldman Sachs, General Electric and WRI had not only found a name for their partnership – the Aqueduct Alliance – they had also developed the index into a water database and mapping tool, which can include the amount of infrastructure investment taking place in a given region.
‘If you play it right,’ says the advisor, ‘the results of this impending water crisis can be very good’
Moreover, they had put an ‘environmental’ spin on the project, claiming that it will help corporations, governments and stakeholders become more aware of their ‘water footprint’ and thus make more ‘sustainable’ decisions.
That same month the original threesome – Goldman Sachs, General Electric and WRI – invited into the Aqueduct Alliance some new corporate partners: Coca-Cola, Talisman Energy, Dow Chemical, United Technologies and the financial/news conglomerate, Bloomberg LP.
The WRI’s Kirsty Jenkinson told the Financial Times (FT): ‘Companies see the need to get better visibility about water if they are going to have to access it for their business.’ With the new water database, ‘they can see if they are at risk of not getting the water they need, or coming into conflict with other users of that water’.
Presumably, the potential for ‘conflict’ is what attracted United Technologies to join the Aqueduct Alliance. UT is the world’s 10th largest arms-producing company with sales of $11.1 billion in 2009.
Mired in controversy
Coca-Cola has handed over to the Alliance its own proprietary data on freshwater availability worldwide – data collected over years of research for its bottling enterprises. ‘Water is the lifeblood of our business,’ Coke spokesperson Joe Rozza told the FT. The Atlanta-based company has hundreds of bottling-franchises worldwide, many of them mired in controversy. In India and Latin America, Coca-Cola has regularly faced irate local communities who are losing their drinking and irrigation water to Coke’s local bottlers.
In January this year, Britain’s Guardian newspaper reported that Coca-Cola is under fire for propping up Mswati III of Swaziland, one of Africa’s most notorious dictators. Poverty is endemic, political parties are banned and activists are regularly imprisoned and tortured in the country.
Another Aqueduct Alliance partner is Talisman Energy, a Canadian natural gas company based in Calgary, Alberta. ‘We are very excited to have been asked to become the oil and gas sector sponsor for the Aqueduct Alliance,’ Talisman spokesperson Sandy Stash told Marketwire. ‘Talisman aspires to a water management strategy that defines best practices for water withdrawal, reuse, disposal and conservation in our North American shale gas operations.’
Just weeks earlier, in July 2011, the government of British Columbia (BC) awarded Talisman a licence to divert up to 10,000 cubic metres of water per day from the province’s major hydroelectric reservoir for the next 20 years. Talisman uses the water to ‘frack’ for shale gas in northeastern BC. The company has also secured access to 6,200 square kilometres of shale gas deposits along Quebec’s St Lawrence River.
$1 trillion - The value that the global water privatization market is expected to reach next year.
The Aqueduct Alliance intends to generate databases and water-maps with ‘an unprecedented level of detail and resolution’, including advanced hydrological data and ‘geographically specific indicators that capture the social, economic and governance factors that affect companies and economies’. The databases will include up-to-date regional news coverage on water issues.
By September 2011, the Aqueduct Alliance had developed a prototype database/map covering the Yellow River Basin in northern China. Water shortages in China are already so severe that more than half its cities are facing restrictions on water use.
In 2013 the Alliance intends to release four additional database/maps on river basins of ‘high priority’, including the 2,300-kilometre long Colorado River in the US which has experienced years of drought; the Orange-Sengu River in Africa which extends across Botswana, Lesotho, Namibia and South Africa; the Yangtze River in China, where 10 million people were displaced by the Three Gorges Dam; and the Murray Darling River in Australia.
All are regions where water scarcity is enticing speculators to secure water-rights in a ‘buy-and-hold’ strategy. Their model is based on recent events in Australia.
In a short-sighted cash grab, the Australian government in the 1990s introduced a water market for the Murray Darling River Basin – one of the longest river systems in the world and the heart of Australia’s agricultural production. But in 2001 a major drought struck the Basin and within a few years the federal government in Canberra was forced to start buying back water from private owners.
‘Water is the lifeblood of our business,’ Coke spokesperson Joe Rozza told the FT
The price shot up. By 2009, so many speculators had targeted the Basin that some $3 billion in water-rights were bought and sold in that year alone. The government was forced to compete with international speculators, including giant hedge-funds.
By September 2010, the Australian government had spent at least $1.4 billion buying back water-rights. Although the drought eased that same year, the fact that the Aqueduct Alliance is now focusing on the Murray Darling Basin means that the risks and opportunities there are still ‘high priority’.
As one hedge-fund advisor quipped, an emerging worldwide water crisis is creating ‘serious profit opportunities for those in the know’. The Aqueduct Alliance database/ maps will show where those opportunities are located. Another 15 regions across the world will be analyzed once the Alliance has created its first four database/maps.
‘If you play it right,’ says the advisor, ‘the results of this impending water crisis can be very good.’
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