As we look at the long-term issues that sustainability brings forth, resource depletion and scarcity are top of mind. We’ve written about water a variety of times at this blog, but this past week brings a whole new confirmation of the scarcity that we face.
Last week, Bloomberg reported that the Director of National Intelligence released a report saying that competition for scarce water over the next decade will fuel instability in regions such as South Asia and the Middle East, all of which are important to the U.S. national security.
Although the report doesn’t suggest that we are looking at an all out war over water (in the next 10 years), they do highlight that they expect nations to start using water as a bargaining chip with each other. They also go on to suggest that the adoption of water as a weapon by states or terrorists will become more likely after 10 years. It highlights that the US intelligence community has a growing interest in understanding how environmental issues such as water shortages, natural disasters and climate change may affect U.S. security issues. They go on to highlight that annual global water requirements will be 40% more than current sustainable water supplies by 2030.
So as an investor, is this not something that we need to start thinking about now? Yes, we’re talking 10 years out, but as I recall, in terms of the feasibility process for new mines for resource companies, 10 years out is tomorrow. So are we looking at risks that need to be considered in approvals for new mine sites? Will resource companies not only have to work with the communities in which they hope to extract resources, but will the geo-political issues of our times not become even more concerning? Are we asking these types of questions of companies in the resource sector? Probably not at this point as most financial analysts won’t put any value on those operations into their financial models for some period of time. The questions I have are: Will the risk be worth the effort? What will this do to commodity prices? Will we see more public-private partnerships on the water front?
With the announcement of the report also came the announcement of a new public-private U.S. Water Partnership that includes Coca-Cola Company, Proctor & Gamble and Ford Motor Company. Sounds like some global companies are already thinking about these issues. I think their shareholders should be too!