2024 Outlook: Water stress and global operational challenges
Extreme climate events in recent years have highlighted the importance of water as a strategic global resource. The prevalence of severe, difficult-to-predict weather patterns is likely to continue across the globe, affecting populations, countries’ economic performances and key industries that rely on water as an essential resource.
The management of water stress may become increasingly strategic for policymakers and the private sector in the next decade. It will also drive renewed environmental activism, operational and supply chain-related disruptions, and, in some cases, legal action against the heaviest water consumers and polluters. As the world adapts, companies will need to prepare for heightened water use scrutiny, not just by regulators but also by local communities.
The outlook for climate change will impact access to water and force many countries to modify how they manage resources. Governments and businesses will face heightened physical risks and economic effects, including restricted electricity generation, agricultural losses and supply chain disruption.
Climate scenario projections by S&P Global Sustainable1 for the coming decades forecast that water stress and drought frequency will increase in many parts of the world:
• Increasingly frequent droughts and heavy rains to hamper electricity generation
More frequent extreme weather events will raise corporate electricity costs and increase fiscal expenditures for countries.
• Droughts and floods to disrupt agricultural export-dependent countries
More regular multiyear El Niño and La Niña weather will make prolonged droughts and flooding more frequent, disrupting agricultural production and increasing food scarcity. As extreme weather events become more prominent, crop yields are at risk of becoming more unreliable, raising costs for producers, exporters, consumers and lowering export revenues.
• Governments to increase scrutiny of water concessions
Regional and national governments will need to make policy interventions and support businesses navigating water stress.
• Droughts raise risk of cargo bans, causing delays, higher costs
Changing precipitation patterns will increase water stress levels in rivers and canals that move a significant amount of vessels, impacting supply chains, raising shipping rates and potentially forcing additional reliance on road transport. Greater use of road cargo would make the agribusiness sector more vulnerable to frequent strikes by truck drivers, exacerbating delays and increasing the likelihood of spoiled produce.
• Water scarcity in focus
More frequent extreme weather events are projected to cause additional global operational challenges and physical risks in the next decades. Access to sufficient supplies of water will be an essential facet of longer-term economic diversification plans and the sustainability industry outlook.
Download the full 2024 Sustainability Industry OutlookClick Here
The Big Picture: Outlook for 2024
See what’s in store for 2024 with our Capital Markets Big Picture Report