The world has entered a ‘global water bankruptcy,’ but markets are mispricing water as drought costs rise to $307 billion annually, analysts warn |
The world has entered a ‘global water bankruptcy,’ but markets are mispricing water as drought costs rise to $307 billion annually, analysts warn
The world is in deep water, but only metaphorically. Basins, aquifers, and other natural storage systems have been drained past recovery in our lifetimes, and one analyst warns markets aren’t taking the matter seriously enough.
The United Nations University Institute for Water, Environment and Health (UNU-INWEH) released a bombshell report earlier this year warning of “global water bankruptcy,” finding humans have overdrawn water from the natural environment.
UNU-INWEH director Kaveh Madani put the crisis in economic terms in the report: “In finance, when you spend more than you earn for too long, you go bankrupt. We have done exactly that with our water ‘checking’ and ‘savings’ accounts.”
The natural emergency has widespread economic impacts. The value of water and freshwater ecosystems tallies up to $58 trillion, or about 60% of the global GDP, according to the World Wildlife Fund’s 2024 Living Planet Report. Within 25 years, about 46% of global GDP could come from parts of the world with the highest water risk, compared to 10% today.
EBC Financial Group market analyst Sana Ur Rehman said despite the ways in which a lack of water threatens economic growth, markets are not pricing in the costs of water-related risks, and are overlooking the need for key resources to replenish and sustain the crucial resource.
“Water has no globally traded futures contract. It has no liquid benchmark price. It has no standardized risk metric that flows into credit models, equity valuations, or sovereign debt assessments,” Ur Rehman wrote........