The Impact of
Water Management

Water is a basic human need, an essential economic input, and a fundamental element of all environmental systems. As water grows scarcer, its management is becoming increasingly important to the health of businesses, cities and communities, and natural ecosystems. When investors want to understand how their portfolios are driving a positive impact on water management, the first question they must ask is: What sort of impact do they hope to achieve?

Morningstar Sustainalytics divides its impact metrics into measures of a company’s operating impact, and measures of revenue derived from involvement in sustainable activities. Sustainalytics identifies three operating metrics: water withdrawal, water consumption (water that is withdrawn and not returned to its source), and water intensity (water withdrawal per $1 million of revenue). All three metrics align to SDG 6; water consumption and withdrawal also align to SDG 12. Investors can use these metrics to tailor portfolios or engage with management: Just 13% of companies report water consumption; 28% report withdrawal and intensity; and a mere 3% report on all three.

Water-management revenue metrics include nine separate measures. These cover revenue derived from the construction of water supply and wastewater infrastructure and services; the renewal of water supply and wastewater infrastructure; the development and manufacture of water technologies and equipment; the restoration of wetlands; and the provision of services related to water adaptation and watershed management. All nine revenue measures align to SDG 6, SDG 11, and SDG 12.

There are 16 publicly traded companies in the U.S. that derive more than 10% of their revenue across these nine categories. Five are water utilities, and 10 develop and manufacture water technologies. These include Advanced Drainage Systems, Badger Meter, Danaher, Ecolab, Evoqua Water Technologies, Franklin Electric, Itron, Mueller Water Products, Otter Tail, Watts Water Technologies, and Xylem.