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Writing
in National Geographic in December 2012 about “small-scale irrigation
techniques with simple buckets, affordable pumps, drip lines, and other
equipment” that “are enabling farm families to weather dry seasons, raise
yields, diversify their crops, and lift themselves out of poverty” water expert
Sandra Postel of the Global Water Policy Project cautioned against reckless
land and water-related investments in Africa. “[U]nless African governments and
foreign interests lend support to these farmer-driven initiatives, rather than
undermine them through land and water deals that benefit large-scale,
commercial schemes, the best opportunity in decades for societal advancement in
the region will be squandered.”
That
same month, the online publication Market Oracle reported that “[t]he new
‘water barons’—the Wall Street banks and elitist multibillionaires—are buying
up water all over the world at unprecedented pace.” The report reveals two
phenomena that have been gathering speed, and that could potentially lead to
profit accumulation at the cost of communities and commons —the expansion of
market instruments beyond the water supply and sanitation to other areas of
water governance, and the increasingly prominent role of financial
institutions.
In
several instances this has meant that the government itself has set up public
corporations that run like a business, contracting out water supply and
sanitation operations to those with expertise, or entering into public–private–partnerships,
often with water multinationals. This happened recently in Nagpur and New
Delhi, India. In most rural areas, ensuring a clean drinking water supply and
sanitation continues to be a challenge. For-profit companies such as Sarvajal have
begun setting up pre-paid water kiosks (or water ATMs) that would dispense
units of water upon the insertion of a pre-paid card. It is no surprise that
these are popular among people who otherwise have no access to clean drinking
water.
With
climate change, however, the water crisis is no longer perceived as confined to
developing countries or even primarily a concern related to water supply and
sanitation. Fresh water commons are becoming degraded and depleted in both
developed and developing countries. In the United States, diversion of water
for expanded commodity crop production, biofuels and gas hydro-fracking is
compounding the crisis in rural areas. In areas ranging from the Ogallala
aquifer to the Great Lakes in North America, water has been referred to as
liquid gold. Billionaires such as T. Boone Pickens have been buying up land
overlying the Ogallala aquifer, acquiring water rights; companies such as Dow
Chemicals, with a long history of water pollution, are investing in the
business of water purification, making pollution itself a cash-cow.
But
chemical companies are not alone: GE and its competitor Siemens have extensive
portfolios that include an array of water technologies to serve the needs of
industrial customers, municipal water suppliers or governments. (In the last
year and a half two Minnesota based companies have become large players in this
business—Ecolab, by acquiring Nalco and Pentair by merging with Tyco‘s Flow
Control unit—both now belonging to S&P’s 500.)
The
financial industry has also zeroed in on water. In the summer of 2011,
Citigroup issued a report on water investments. The much quoted statement by
Willem Buiter (chief economist at Citigroup) gives an inkling of Citigroup’s
conclusion: “Water as an asset class will, in my view, become eventually the
single most important physical-commodity based asset class, dwarfing oil,
copper, agricultural commodities and precious metals.” Once again, several
others had already seen water as an important investment opportunity, including
GE’s Energy Financial Services, Goldman Sachs and several asset management
firms that are involved investing in farmland in Asia, Africa, South America
and Eastern Europe.
Given
these recent trends, initiatives that track the water use of companies or map
information regarding water related risks could be double edged. Some examples
include the ‘water disclosure project’ and the ‘water-mapping project’. Both
are initiated by non-profits/ think-tanks, the former by UK-based Carbon
Disclosure Project and the latter by the US-based World Resources Institute.
While distinct, they are linked by their shared constituency: global investors
concerned about water-related risks. These initiatives could help companies
identify and reduce their water footprint, or could lead to company investments
that follow water and grab it.
The
Carbon Disclosure Project’s water disclosure project seeks to help businesses
and institutional investors understand the risks and opportunities associated
with water scarcity and other water-related issues. According to its most
recent report, issued on behalf of 470 investors with assets of $50 trillion
USD, over half the respondents to their survey have experienced water-related
challenges in the preceding five years, translating into disruptions in
operations, increases in expenses and other detrimental impacts.
Aqueduct
Alliance and its water mapping project, which aims to provide companies with an
unprecedented level of detail on global water risks, seems at one level a
direct response to the findings of the global water disclosure reports by CDP.
General Electric, Goldman Sachs and the Washington-based think tank World
Resources Institute are the founding members of the Aqueduct Alliance. All of
them identify water-related risks as detrimental to profitability, continued
economic growth and environmental sustainability. The water maps, with their
unprecedented level of detail and resolution, seek to combine advanced
hydrological data with geographically specific indicators that capture social,
economic, and governance factors. But this initiative has given rise to
concerns that such information gives companies and investors unprecedented
details of water-related information in some of the world’s largest river
basins.
Many
of these investors, described as the “new water barons” in Jo-Shing Yang’s
article ”Profiting from Your Thirst as Global Elite Rush to Control Water
Worldwide,” are the same ones who have profited from speculating on
agricultural contracts and contributing to the food crisis of the past few
years. The food crisis and recent droughts have confirmed that controlling the
source of food—the land and the water that flows under or by it—are equally or
even more important.
A
closer look at the land-related investments in Africa, for example, show that
land grabbing is not simply an investment, but also an attempt to capture the
water underneath. At the recent annual Global AgInvesting Conference (with well
over 370 participants), the asset management groups and global farm businesses
showcased their plans, including purchases of vast tracts of lands in varying
locations around the globe. With tools such as water maps, such investors are
further advantaged. The global rush for land grabbing, as well as the
resistance to it, shows that all stake-holders—pension funds, Wall Street or
nation-states on the one hand or the people who currently use these lands and
waters, and their advocates on the other—are well aware of the life-and-death
nature of land (and water) grabbing, especially in the case of developing
countries.
National
and international regulatory mechanisms must be put in place to ensure that
basic resources such as land, water and the means for accessing fresh water do
not become merely the means for profit accumulation for the wealthy, but are
governed in a way that ensures the basic livelihood of those most dependent on
it. The last session of the Committee on World Food Security (a United Nations mechanism set up to address
the food crisis) was a good starting point, and has set in motion a series of
consultations on principles for agricultural investments. Civil Society
Organizations are tracking the various ways in which regulations may develop in
national contexts: simply facilitate land grabbing, mitigate negative impacts
and maximize opportunities or block (or roll-back) land grabbing altogether.
Ultimately, any policy approaches must prioritize local communities’ access to
food and water: Any water-related investments needs to be about allaying their
livelihood risks and enhancing their ability to realize their rights, whether
it is in developing countries or developed countries.
