Water Use and Scarcity
Overview
Water is one of the planet's most critical resources, yet its value is felt most acutely when it becomes scarce. Chronic water stress and drought are increasingly amplified by nature degradation and climate change, creating systemic financial risks for companies and investors operating in highly water-dependant sectors such as agriculture and livestock, and especially in regions where water is already a scarce resource.
Material risks and opportunities
Water stress: A growing financial risk
Water-dependent food systems face rising exposure as water stress intensifies globally, with consequences that extend beyond company performance and investor returns, impacting communities and economies that depend on them:
The Global Commission on the Economics of Water estimates that global freshwater demand will outstrip supply by 40% by 2030, while the World Bank estimates that by 2050, food security for 10 billion people will depend on how countries align food production with available water resources.
Climate change and nature degradation compound these pressures: the OECD finds agriculture is the most drought-affected sector globally, with crop yields falling by up to 22% in dry years, straining livelihoods in farming communities as well as corporate earnings.
Water-related risks are drawing growing investor and regulatory scrutiny, with disclosure required under frameworks such as TNFD and CSRD, yet water risk disclosure remains among the weakest-performing factors assessed across major livestock producers.
Technology alone will not close the gap
Water-resilient technologies offer meaningful but partial mitigation:
Strategic investment in drip technologies and water recycling can help companies adapt to a water-insecure future.
If made from today, the average savings per company from such investments would reach over US$1 billion by 2050.
But mitigation potential is limited once capital and operating costs are considered, requiring restoration of at-risk basins and system-level interventions too.
Pathways to water resilience
Systemic water resilience can only be achieved if:
Capital flows to preserve and restore water ecosystems must increase significantly.
International governance and protection of water resources must become more effective.
Cross-sector mobilisation and standards must develop to manage water, climate, and nature interdependencies.
How financial institutions can assess the financial materiality of water scarcity
The FAIRR Water Risk Monitor model supports financial institutions across the investment process, from identifying exposure through to engagement and policy influence. Different teams can draw on the same underlying data to serve distinct purposes.
Investors can:
Exposure assessment
Investment and research teams can use the WRM to screen and assess the water risk exposure and disclosure gaps of their portfolio holdings, based on geography, value chain position and protein type.
Stewardship
Stewardship teams can use the WRM findings to determine which investee companies warrant engagement and to support dialogues on water risk assessment, materiality, target setting, CAPEX commitments, mitigation and disclosure, and water risk governance.
Policy and systemic change
Teams engaging in policy and advocacy can use the WRM to support their independent participation in regulatory and supervisory consultations and engagement with central banks and supervisors on water-related disclosure standards, complementing company-level stewardship.
The Hidden Costs of Water Scarcity in Livestock Companies
FAIRR's Water Risk Monitor model quantifies chronic water stress and drought exposure for 18 of the world's largest listed livestock companies across grain and feed production, animal raising, and animal processing and packaging, and projects the impacts on costs and margins to 2050 under three climate and socioeconomic scenarios.
View reportWater scarcity at a glance
Water is one of the world's most economically significant yet undervalued resources. As demand intensifies against a backdrop of climate change and nature degradation, water scarcity is emerging as a systemic risk to food systems, economies, and financial stability.
70%
share of global freshwater withdrawals used by agriculture, making the sector highly exposed to water scarcity. [1]40%
projected gap between global freshwater demand and supply by 2030. [2]6x
how much costlier an average drought event in 2025 is estimated to be compared with 2000. [3]0.4-0.8 percentage points
average annual GDP growth lost to moderate-to-severe droughts, with the largest effects in low-income, agriculture-dependent economies. [4]Equipping investors with solutions to address water scarcity in livestock companies
FAIRR equips investors with the data, research and tools, including the Water Risk Monitor model, needed to understand and assess material risks across the food system, from water use and scarcity to drought and other climate-driven events.
FAIRR’s work on water use and scarcity sits alongside wider research on climate, biodiversity, and food system transformation, giving investors a fuller picture of the material risks shaping the sector and the tools needed to act on them.
