S&P reports "largely negative" impact of growing global water-related risk

Credit rating agency S&P Global has reported water-related risk as having a growing, largely negative impact on its rating actions over the two years to August 2017.

S&P said over that period, where water risk was a key factor, about 70% of its ratings decisions were negative.

Of some 9,000 corporate research updates S&P published during the July 2015 to August 2017 period, environmental and climate factors were “relevant” in 717 and in 27% of those water was an important consideration. In 28 instances “water factors were a key reason we raised or lowered ratings, revised outlooks, or placed ratings on CreditWatch,” said S&P.

Primary credit analyst, S&P Global Ratings, Beth Burks, said “Climate change and the depletion of groundwater reserves are increasing freshwater scarcity, flooding, and droughts and other water related risks. The credit impact of these risks, according to a new S&P Global Ratings report, is largely negative.

S&P sectioned water risks as event-driven or continuous factors. Examples of event-driven factors were drought, heavy rain, and floods, which have one-off impacts. Continuous factors related to corporations that were dependent on water and weather as a resource or service.

It found that events, had a greater credit impact than continuous risks and opportunities with a rating change in 24% of the cases with event-driven factors, and of those only 17% were positive. “As climate change intensifies, it is likely we could see more rating actions caused by water-related events,” said S&P.