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Mark Lee: Hi, everyone, and welcome to this next episode of The Sustainable Connections Podcast. I'm Mark Lee. I'm the global director of thought leadership at ERM. We're gonna be discussing water in the context of a new report from JPM, J.P. Morgan, and ERM, which was entitled The Future of Water Resilience in the US. We've just published that jointly. Uh, we're gonna dig into that and also explore a little bit the nature of our teams working together. To do that, I have four people with me today, two of them from JPM, two of my own ERM colleagues, and I just wanna bring all your voices in and get you to introduce yourselves to our listeners so that we can get rolling. Uh, I'm first gonna turn to Vamsi Alla of JPM, and Vamsi, if you can just start us off by telling us what your role is, but also how did you come to have a focus on nature and water in your work?

Vamsi Alla: Thank you, Mark. I'm Vamsi Alla. I'm a managing director in J.P. Morgan's corporate advisory and [inaudible 00:01:06] solutions team. I'm one of the lead architects of J.P. Morgan's Carbon Compass methodology that outlined the firm's approach to reducing emissions intensity in our carbon intensive financial portfolios. I also lead engagement, uh, with a lot of our corporate clients on topics at the intersection of sustainability and corporate finance. My own journey into sort of sustainability, like more broadly, on, on the professional level began around, uh, five years ago, when, when I was tapped to sort of, uh, develop the Carbon Compass methodology, so I started with carbon, uh, as a focus. But personally, like water as a sustainability topic had been on my mind since my childhood. I grew up in India. I, I, I used to [inaudible 00:01:47] remember, uh, needing to, like, sort of collect water at a certain p- certain time, like every day, and use it for the rest of the day, so I was tremendously pleased over the last couple of years, like when I started to incorporate, like, more nature- and water-related topics into my professional curriculum, and, uh, again, as through the podcast I'm sure we'll discuss, like sort of what the, uh, different companies, investors are talking about, and why this is an increasingly important topic.

Mark Lee: Fantastic. It's so great, actually, when aspects of our personal experience and the things we're interested in get to connect to our work like this, and I love, of course, that we find more and more people in banking doing the commercial side of the work who are focused on nature, and water, and climate, and it's been a pleasure to work with you and your team on those topics. Next up, also from J.P. Morgan, we have Pradipta or Prad, you're gonna hear me say a lot during the call, Parhi, and Prad, please introduce yourself.

Pradipta Parhi: Thanks for having me, Mark. Excited to be here. So I'm an executive director working climate technology innovation and strategic investment team at our corporate commercial and investment bank. I like to say I wear two hats in my role. First, I dive into due diligence of strategic investments in various climate technologies, like hydrogen, nuclear, critical metals. My focus really is, uh, on mitigating emissions in those hard-to-avert sectors, but I also explore opportunities in water, sustainable finance, climate data, and analytics. Second, I serve as an innovation and scientific advisor to our senior leaders across different, uh, business lines, helping to boost our thought leadership in these areas. Before I ventured into finance, uh, I was, uh, deeply involved in climate academic research as part of my PhD, um, and I also spent six years in mining and steel sector in India, which has proven to be incredibly useful for my current work. So I'm really excited and looking forward to our discussion today.

Mark Lee: Terrific. Welcome, and we'll, we'll look to draw on that really diverse background, and I hope to pull on the innovation threads that were tucked in the middle there. My own colleagues from ERM, both Tess Jarriel and Matt Haddon, with us today, and Tess, can you take the, the mantle next and-

Tess Jarriel: Yeah, of course.

Mark Lee: ... tell us a little bit about yourself?

Tess Jarriel: So my name is Tess Jarriel, and I'm a senior consultant on the water resources, modeling, and climate change group here at ERM. Um, before coming to ERM, I had kind of more of a technical background. I got my doctorate in environmental engineering with a focus on water resources engineering. And since joining ERM a few years ago, I've had, um, the opportunity to work directly with a variety of clients in different sectors, working on things like water risk assessments and water stewardship projects, and helping companies rework or create, uh, different water project standards. So hopefully, uh, today, that direct line to kinda what clients are asking from us in the consulting, um, world regarding water and my kinda technical academic background on the environmental side will help, um, add to a great discussion.

Mark Lee: Yeah, and that background certainly explains how we made you part of the report authorship team, so thank you. Matt, how 'bout you?

Matt Haddon: Yeah, so great to talk to you again, Mark. Um, so yeah, I, I'm a partner in ERM, been around for far too many years now. Spent half of my life based in the UK, but part based in The States. I've been leading on nature and water in ERM for the last couple of years, and before that, I was focused on client, which is in fact, was when we met [inaudible 00:05:35] and team, because, um, we, we bumped into them at a very propitious time, when they were starting to, to really get serious about that Carbon Compass methodology. And I'm glad to say we've worked with them throughout that, and it's great that we get the opportunity to work together on water, because I think we both see that there's a, there's a real shift going on amongst the corporate world in America, as well as elsewhere. Um, I just got back from the Biodiversity COP down in Cali, Columbia, and, uh, it's clear that the whole natural world is becoming a significant focus for a whole bunch of different clients.

Mark Lee: Vamsi, Prad, I just wondered if you have some observations or conclusions on what you saw of COP16.

Vamsi Alla: Uh, sure, Mark. Um, I think, um, as three broad points, like, I wanna make. Uh, I think first, uh, uh, COP16 reinforced the importance of connecting with the clients and communities to better understand sort of what needs and what solutions, like, they need. But second, I think it's important to understand the client demand for products that embed nature and biodiversity, uh, and-

Mark Lee: Mm-hmm.

Vamsi Alla: ... we should be able to use lot of the framework that has been built around sustainable finance, that's been, like, funding a green transition, to leverage that for nature and biodiversity. That's the second one. And then the third, uh, point I would note is, uh, there is, there's a lot of focus on how to increase the bankability of the projects in the space, right? So we need to get the financial sector and the project developers thinking on, um, sort of leveraging these frameworks to improve, improve that, so that we can have more capital and finance [inaudible 00:07:14] sector.

Matt Haddon: Can I just add as well, to your point, Vamsi, about, about seeing the signs of, of building on previous momentum. O- one of my takeaways from Cali was that lots of conversations I was in, all the way through to some very senior ones, including the, the guy that runs WBCSD, lots of people were saying, "Isn't this a single agenda? Isn't, isn't climate connected to water, connected to biodiversity, connected to desertification?" which is the other, um, often forgotten COP. So I think there's a growing realization that it's all connected together.

Mark Lee: I think incredibly true, and, um, yeah. Prad, uh, anything to chime in on, on the COP16 perspective, about interconnections or otherwise?

Pradipta Parhi: Yeah, I was trying to actually, uh, speak with some of our colleagues who went there, to categorically find what was really discussed about water. It's a little disappointing that we didn't get much to talk about, uh, water, although we kind of highlighted in the paper, like, you know, the green water, which is kind of the main source for nature, biodiversity, is already crossing some of our planetary boundaries. Um, so that's disappointing, but I got a almost fiction-like case study. Apparently in a drought region, there are elephants who were trying to dig in and break water pipes to get water, and that actually created issues for insurers and bankers for kind of funding (laughs) water infrastructure, uh, and I was looking around actually... It's in the public domain as well, so anyw- anyway, so you, you, this, this is, this was interesting. Um, but I c- If I could just highlight, also, another conference I attended, this is last month, WEFTEC, so that's a water technology conference, more than 20,000 participants, thousands of companies, very, very encouraging to see kind of innovations across the whole ecosystem of water. Um, and we had a chance to talk to, like [inaudible 00:09:25] founders, corporate venture arms. You know, in parallel, like, uh, this was of course [inaudible 00:09:31] but a very global event, but there are, in some conferences, where actually, water is actually getting a lot of attention, which was encouraging.

Mark Lee: Well, water at the absolutely center of, of the corporate agenda and some other places, and that's so good to hear. And then your, your anecdote about the elephants and the pipes, and the kind of literal collision between, uh, humanity and nature as water scarcity increases is, is fascinating, and so vivid to picture. Um, let's dive into our report, and, uh, if they didn't talk about water in the depth we would've hoped, uh, in Cali, we're certainly gonna rectify that today by really diving deep, and probably hitting a lot of inadvertent, uh, water references as I just did. Uh, Vamsi and Matt, I wanna start with the two of you and, and ask the relatively simple question, at least in phrasing, but complex and meaningful. Why now? Y- you know, what was so important for JPM and ERM in combination to get into the topic of water scarcity and how water resilience is reshaping in the US at this point, in 2024? And Vamsi, can you kick us off?

Vamsi Alla: Sure. So, I, I feel like water is one of those topics that's in a lot of people's mind for a long time, but sort of never cracks the boundary of, oh, it's really important and you need to act now (laughs) uh, to address

Vamsi Alla: ... some of the issues, uh, that are, that are raising. With that backdrop, I, I think we are seeing, like, from a financial backing perspective, three broad themes that are sort of bringing this issue to the forefront. Like, first, [inaudible 00:11:16] like as our, our work, uh, on carbon compost and climate change, we've seen that lead to availability in the water supply, and that's creating challenges for our corporate clients to sort of properly plan for their water needs. And the second issue is we are seeing a huge, uh, onshoring effort, uh, into the U.S. where the manufacturing investment is going up and typically, like, those industries like our heavy, like, water consumers. And third, with the advent of AI and the data center growth, uh, which need, like, water for, uh, the cooling use cases, the expected growth, uh, in that area is also bringing a lot of focus on, uh, sort of the water usage for, for those companies and use cases. So once we combine these three points and, and look at the availability in supply, uh, and the increase in demand, it's becoming abundantly clear that companies and investors are gonna, like, focus on it, uh, and there's I think primary intermediaries between companies and investors we've felt like we should develop, uh, develop a voice and obviously, like, having done a lot of work with ERM previously, like, we, with a good partner with, uh, with ERM and, and developing that voice and, and going and talking to different stakeholders.

Mark Lee: I really thought it was interesting, Vamsy, how you started with the three separate points and then combined them and kind of scaled their impact. And Matt, I'm gonna turn that over to you, whether you have three more points or wanna talk about what happens as, as those issues collide? Why now? W- why did we dig in in this way on resilience at this time?

Matt Haddon: Yeah. Well, I think the real... Part of the reason for us was that we were seeing a, a convergence between climate change, the impact of climate change and water availability, and our clients. The world of water has been a potential stress point in the world for a long time. I mean, there were books written about water wars years ago. We had that terrible movie, the Mel Gibson movie, which was all part of that same thing. So it's been part of sort of popular culture for some time, but nothing, nothing's really happened. And I think now we're moving to the point where businesses are starting to take it much more seriously. And we, we've been working with a number of organizations in the States where their ongoing operations, whether those are in energy, technology, agriculture, are starting to feel real stress. And, and it's, and it leapt from being a technical issue to being a, an executive issue very quickly, about 18 months ago. So we found ourselves working with very senior clients who were saying, "Oh, we have some real issues that we need to think about with real financial impact." And then when we go into the conversation with, with the J.P. Morgan team, it became clear that they were seeing some similar things from a different angle. We know that once, once, uh, a sustainability topic crosses between, you know, crosses the membrane between the world of the environmental world and the finance world, things start to get very real. We saw that with carbon, and that's now we see oursel- the whole world is on a decarb journey. I see something similar happening with water, the crossing that, that, that bridge to, you know, the worlds of finance, the worlds of business decision making, really starting to take it forward. And, and when I think about the past around water, it's very much a, a technical thing, environmental thing, local politics thing, and I think it's just, it's prime for, for, for much more significant.

Mark Lee: Yeah. No, and a few things I hear from both of you, right, that there are these connections to the developing climate agenda. Matt, your last point separated it out in an interesting way, that water of course is so hyper local, the impacts of the onshoring moment that we live in that we are scaling manufacturing of different types a- all over the country, m- but also in, in regions that are already water scarce, so it almost doesn't matter how efficient the new [inaudible 00:15:30] is, it's incremental growth. I wanna get into some of what the report explores more deeply, and Prod and Tess, maybe this is a good chance to turn to the two of you. Love to get into some of the key findings. So under the umbrella almost that Vamsy and Matt just popped up of scarcity, onshoring, manufacturing, climate impact. Uh, what else did we learn at kind of the next level down? And Tess, maybe you can start on this one, please.

Tess Jarriel: Yeah, sure. Um, I think one interesting thing that we saw in the U.S. specifically that, uh, both Vamsy and you, Mark, already kind of touched on a little bit, is the growth of those really water intensive industries that are occurring in areas that are already considered to be, um, regions of high water stress. So, um, for instance, we've found in the U.S. six of the 11 semiconductor manufacturing plants and about half of the 50 or so proposed hydrogen gas facilities, which are all really water intensive industries, are located in regions that are classified as high or extremely high future water stress. So I think that kind of led us to ask the question, like, conceptually, like, why are these water intensive industries not seeming to take account of long-term water availability in their decision making and what steps can companies take to avoid situations like this? And answering that, you know, there's, there's a lot of practical steps that we can take with organizational structures and data collection and we can, we can touch on some of those details later, but I think kind of like, conceptually, a big picture answer is that there's, like, a shift in mindset that's also required to convince those with decision making power to, like, higher up in companies that water scarcity is a real problem and something to focus on. Vamsy said it too, that there's kind of this vague, like, "We kind of think this is a problem, but how big of a problem is it?" And we're hearing that from our clients, too, people saying, "We wanna implement these strategies. We wanna adjust our framework." Um, but this kind of historic precedent of water being this infinite and cheap resource, there's decades and decades of water's always been there. It's always been available. We've never had problems. So there's no structures in place to kind of facilitate these changes that need to be made, because it's so ingrained in the company policies. But you know, doing this paper and looking at all these instances, you really can start adding them up, like Matt was touching on, about all these stories that are causing companies to have more stress and urgency to address them. You know, you see things about communities running out of water supply and the industry being blamed or groundwater table decline is another, like, hot topic of, uh, resources becoming limited. Um, curtailments that happen in the face of, like, unprecedented, uh, severe drought events or, um, we're seeing more, like, regulatory policies, too, pop up that, um, maybe like, does incentive fees or limitations on the amount of water that you can be permitted for certain, uh, uses. I think that we were seeing that the more that those kind of events are occurring, the, for the first step is to even convince companies that this is a problem that needs to be addressed and it is, it should be at the top of your priority list. And then once you convince them of that, um, making a business case for it and kind of tying back into the financial side of things seems to be an avenue that could potentially work to address some issues.

Mark Lee: Great start. And, and pieces I wanna pick up and follow up, but Prod, I think first, I'll come to you and just, you know, which findings would you highlight, uh, layer on? And then let's see if we can tie them together a little bit.

Pradipta Parhi: Yeah. Um, you know, the, the most interesting question was that, you know, we are kind of recognizing that it's critical, but then why there is no action, right? Um, we kind of highlighted that, you know, water infrastructure is such a long duration asset that these, most of these assets were put up 1,500 years ago, right? And so really what is going on in, for last two decades at least, most of these assets, we realized they're almost reaching their kind of lifespan. So that brings one aspect of the risk to the forefront, on top of it as Vamsy and Matt and, uh, Tess already highlighted, the climate [inaudible 00:19:39] is making it even worse. But then the second challenge is, like, okay, now we recognize that water is critical and why don't we do the required investments, right? So that's what we kind of go around and try to highlight, that where are those pockets of investments need? And who can provide those funding? So our thesis is that the problem is already getting to start, like, people are now recognizing and you see, like, we sent government support for infrastructure public finance, but the, the challenge, the magnitude of the need for financing is so great, that we propose that the public financing is not enough and we need private sector. And there are research already suggesting that when you actually bring PPP, public private partnership, the projects are more efficient and more cost-effective. We have highlighted, you know, in the magnitude of 90 to 100 billion for a year of investment required just to maintain the service quality as such. And then that will grow up to 150 billion, so if you are considering over next couple of decades, we are talking about more than a trillion dollar of capex. So yeah, so these are kind of, uh, interesting times, and, and we of course are going to de- like, wear out VC, private equity, infra funds, public market service bonding to different parts of the supply chain, and you know, we can get into more in the round table we have had, where we actually brought all the stakeholders and discussed, like, who sees the risk opportunities from their unique lens?

Mark Lee: And yeah, just trying to remember the specific numbers from the report, and you just hitting on that 90 to 100 billion, Prod, a- a- and used I think the word maintain, but can I confirm, that's actually the gap, right? That's the current shortfall in needed investment every year to just maintain the water infrastructure that we have?

Pradipta Parhi: Correct.

Mark Lee: Yeah. So, so so much to do, and when I listen to the things you and Tess laid out together, it, it seems that it's so much about where these issues collide, right? The U.S. economy has been a marvel in recent years compared to most of the rest of the world and it's continuing to enjoy really significant growth. Some

Mark Lee: Some of that growth is happening in water scarce areas, some of it is high water demand. Those industries are also changing incredibly quickly right now. I am sure that folks in the data center world who are listening to this would say, "Well, our evaporative cooling technology was, was highly water dependent. But look at what we're bringing online in, in terms of air and especially liquid cooling technologies, and where they'll move us." But we need a whole bunch of that kind of innovation over time to move forward. Prad, you mentioned the event that we hosted and, and I think we can m- maybe unveil what that was to folks who are listening and, and make it make more sense. And also use that to talk a little bit about what we maybe hope that J.P. Morgan and ERM clients will be able to do with the information in the report. So, Bansi and Matt, if I can come back to you and, Matt, I'll start with you here to say, what was the consultation that we held in New York at Climate Week as it was, an- and what kind of reactions did we get to what was then a, a draft version of the report?

Matt Haddon: We had a, an idea that we would publish the full report at in ,New York for Climate Week, as you say. Uh, and we decided whether we realized that, that there are some really, really well-informed people that play in the financing of water space. So, we pulled them together at J.P. Morgan's office in Manhattan, 20 or so people, to really test our initial thinking, that you see now represented \in the paper. And it was really interesting to me for a couple of reasons. I mean, the group was made up of three or four guys who have been playing in the water space for literally two or three decades. So, they've been there, seen it and have incredible insight. We had a, a similar size cohort of people who play in the water technology space. We had five or six people from a mix of, um, big asset holders. Um, they're the big, uh, pension fund, the major, major asset houses. And then there were three or four players in the finance space who are rating agencies and those sorts of players who are waking up to it. And then a couple of people from industry as well. So, it's a good mix of perspective. And I found it particularly interesting, because the people who have been playing in the space for a long time were kind of going, "We told you so, and now it's getting real." The technology players are getting very excited 'cause they now see the market blossoming in front of them. Industry had some perspectives about, about what they were seeing. The kind of, the, the most interesting thing to me was, you could see the awakening happening in front of us, from the big asset holders and the ratings agencies, 'cause they were like, "Ah, I hadn't really thought about this." So, so there were all these perspectives around the paper. Huge support. I asked them a very simple question at the end, which was, "Okay, we think we're onto something. Um, do you agree?" And they all said, "Absolutely, now is the time to take this very much more seriously."

Mark Lee: A- And to your point about the ratings, I think it overlaps the comments about Cali and COP16 that, yes, some ratings cover water. There's of course CDP water in particular, but mostly we have broader sustainability ratings and ways of assessing financial-related risk and, and water that don't go that deep on this particular topic yet, but we sense it's coming. Bansi, what would you add about the event and the reaction there, but also just about how JPM and clients might be able to apply some of the learning from the report?

Vamsi Alla: Yep. Um, I totally concur with like, sort of, Matt's takeaways there. Uh, really sort of people who have spent decades on, on the topic, uh, in water and, and to have, hear them, hear from them or as a group, like discuss what the current challenges are, were obviously like very, uh, fascinating and hopefully it reflects in the paper that, uh, that we've put out. From a client engagement perspective I, I would again, sort of, uh, bucket those into three. I'm sure you might be seeing a pattern here, I always like to put things in three.

Matt Haddon:  (laughs).

Vamsi Alla: The, the first one is a big investment gap that Prad spoke about. There's a infrastructure as an investing class is, is, uh, growing tremendously. Like, even outside the water concept, it's a huge focus area for, for banks like more broadly. And we see the ability to deploy capital for these like large infrastructure funds into the water space as, as an emerging opportunity. And, and I think more awareness on, on this topic, like will, will help the cause there. That's one. Number two is companies in what I would call water-intensive sectors, right? Like, you know, if you roll back the clock five years, the, the point I was making on how companies in carbon-intensive sectors have had to sort of elevate their discussion on carbon, or decarbonization strategy up to the C-suite, and, and the conversation that happened, uh, since then, we would see that that pattern following the same trend in, in companies in water-intensive sectors, right? So it's, it's no longer a technical issue and companies would need to strategize, uh, at a higher level. And, again, in the paper, like we lay out certain best practices on how companies should think about it. Uh, we are already seeing companies talk about water risk much more in the disclosure. We are seeing companies set water-efficiency targets, again, following the trend of the carbon intensity or carbon reduction targets. So. We are seeing movement there, but I think. Again, as, as we see the confluence of all the factors we discussed, uh, we expect the focus to increase more in that second bucket as well. And then, on the opportunity side, the third bucket, which is, uh, again, I know Todd mentioned the WEFTEC conference and the, on the big water tech companies, uh, in the paper we make the observation that among sustainability funds, uh, water is a very interesting theme. A lot of these water tech companies attract significant interest from that pocket, uh, of, of funds. And there's a lot of opportunity for them to like deploy more capital in enhancing the solutions that can be made available for the water-intensive companies to address their issues, right? So. I think there's a lot of like practical, tangible takeaways for our clients, and that we hope to engage further and dig deep, uh, as we go forward.

Mark Lee: Uh, all joking aside, lists of three are great. They're, they're memorable as you tick them off, and just listening to your run through the opportunity to invest against the, the gap in infrastructure financing that we have, the need, and what we're seeing in terms of companies in water-intensive sectors or water-scarce regions getting better at understanding that, getting better at disclosure, and then the sheer opportunity that comes with this. It's easy for this all to look like a threat. Of course, you know, risk and opportunity tend to be those mirroring sides of the coin. And there's some really interesting opportunities emerging for finance, technology and innovation to push this forward. Um, Tess, kind of connecting to that, I'm wondering what you can tell us about the degree to which the research and the report found that corporations have got good water st- and, uh, water management strategies in place. Um, and even if they have them, are they kind of mature and complete yet? Or are they a bit piecemeal, which is a bit like the landscape of this as, as you try and look across and gather this info across, uh, the continent?

Tess Jarriel: Yeah, so we see... We see quite a range of the development of water-risk managing strategies, at least in, in our clients at ERM. You know, there's some companies who are really ahead of the game. They've already set reduction goals, they're implementing water management strategies, getting their assets in line with the AWS standard, and they sometimes just want our help, you know, implementing a strategy that they already have. But, a lot of our clients are in the early stages of developing water strategy and are looking for kind of help setting those frameworks. Some of the companies are, you know, we're seeing them opt for an all-in approach from the beginning, where they're asking for help rewriting their water standards from the top down, creating robust frameworks for water management across their entire portfolios, and really kind of diving in and investing fully in, in this, 'cause they've already been convinced and made their own internal business case for why this action is good. And others, um, are still a little bit kind of nervous about fully diving in and investing, um, in something that is, that is so kind of new, and changing that historic mindset of, "Water has always been available. Why are we gonna invest millions of dollars in this?" And those people or companies that are a little bit more tentative are asking for us to pilot individual site assessment, so they can kind of just dip their toe in, uh, before committing to more extensive adjustments. Um, and to answer your question about, you know, the maturity, and whether or not those frameworks are prepared, um, for potential challenges of water scarcity, um, I mean, again, there, there's a range. There's some companies that are doing really, really great kind of really robust methods to track their water use and, uh, create risk frameworks. But one, just to touch on what the kind of errors that we do see in the standard way that people are looking at risk, there's kind of two key ones that I've uh, seen, talking to clients. And one is only focusing on kind of single basin-wide global water balance data sets. A lot of companies will look at tools like WRI Aqueduct. Or the WWF risk filter, enter their location and say, "All right, here's my risk there and I'm going to treat that as truth." And it's really convenient, and that, that data is useful, and helpful, and wonderful as a screening tool. But there's been case studies that we've shown that it shows that misses a lot of key information when you only focus on the basin scale of water risk. So, you could completely miss all these different elements of risk. And the- the second kind of issue that we see is, um, kind of not focusing all the new- on all the nuances of water risk. So, people are really focused on the quantity element of water, the present quantity. How much water is here for us right now today, without considering all these other nuances like how, uh, what's the quality of that water? What are regulatory restrictions that might prevent us from accessing it? Um, what are the potential reputational impacts on our company of selecting this water source? What does community local supply look like? That sort of question. And then beyond that, there's another third layer of a temporal aspect to all of those. So, you can't just focus on your present day, you also need to make sure that you can get enough water and are managing it sustainably, um, into the future. So, what do population growth rates look like throughout the entire lifespan of your project? Is industrial water use in your region static? Or is it growing linearly or exponentially? How might, you know, changing drought, reduce future availability? And I think some companies kind of miss that aspect of all these secondary and tertiary layers of water risk, um, by not, um, fully kind of elaborating on those risks in their own existing

Tessa: ... same frameworks.

Mark Lee: Really intrigued by the comment in the middle there, Tessa about seeing water in so many different ways that, yo- you know, quantity absolutely important, but cleanliness and, you know, the temporal aspect. Everything else that we, we need companies in developing these strategies to take a multifaceted approach. Prat, I wonder if you see these issues of risk and strategy similarly, a little bit differently from where you sit?

Pradipta Parhi: I would, uh, I think, uh, just going back to a little bit, what Tessa and Vamsee, Matt reflected from the round table and all this discussion, I would rather highlight, you know, a couple of, uh, surprises. Um, I mean, Tessa already eluded that the quality aspect is not fully recognized or the risk is not fully priced in. So I think the, the kind of main hot, uh, debate there is the new regulations around something called Forever Chemicals. So we have highlighted in our paper, you know, the liability can be big, big numbers, and, you know, these were all regulated part of, like, just how you treat before dumping the water as part of your industrial processes. But the regulations is catching up to actually the health related impact research, which are everyday discovering new kind of risks. So far out of maybe 10,000, 15,000 chemicals as part of this P first umbrella, only two or three are start- starting to get regulated. So we see a big kind of driver as all the corporate action in terms of how you treat, uh, otherwise, you kind of hold this liability. The other surprising finding was the, the, the kind of water and carbon nexus. We have been talking about, like, differently. But I think one issue came up, which is like, you know, if you just look at water sector, how much does it emit? And actually one of the experts highlighted that, um, you know, it can be eight to 12%, you know, global average or a particular state. So I think when we are starting to now think about water, not only the impact on water sector, but how this nexus works and how do you apply a, you know, decarbonizing strategies into the water sector. Yeah, I just thought that those two kind of were kind of interesting surprises from, from this.

Mark Lee: Yeah. Yeah. And I think it extends some of what we were hearing earlier in the conversation, prod that that water has all these levels or layers of complexity because of the way issues overlap. And you've brought that back into us with the health implications. I think it points to a just transition question for water. You know, how do we manage this so that it delivers the human health outcomes that we need. And, and then that HDO, H2O carbon nexus, I think, is incredibly important too. Matt, that looked like it spurred a thought for you.

Matt Haddon: I wonder whether we can expect to see water, uh, strategic, strategic approaches to it, practical implementation around it, um, as a real source of competitive advantage between companies going forward. I mean, if you go back five, six years, the early conversations about carbon decarbonization, companies would say things that now seem really dumb in hindsight. There's no... There'll be no differentiation on the basis of carbon intensity. And now there is absolutely differentiation between energy producers, between energy consumers on the basis of carbon intensity. I- I'd go surprised to say I think we'll see the same for water. Uh, and I think we're starting to see it already, I mean, some of the big tech players are really very advanced in how they think about water, both about where do they put facilities, which technologies do they use, so we, so we know clients in the data center space are looking at non-water-based cooling because of water challenges. Um, they're taking the, the whole local license to operate piece incredibly seriously because they recognize if they can put their, their facilities in a place that a competitor can't, maybe they can access a market differently. So, so I think we're gonna see some, some really rapidly shifting approaches where there will be winners and losers.

Mark Lee: Yeah, I think good evidence there, even in those anecdotes that water is already competitive, even if not, yeah, recognized as universally a competitive issue. And so, today's conversation, we kind of started outside and away from the report that we just published with some reflections on COP16, the Nature Cop in Columbia. Uh, we're recording this session right after that completed. And that means for folks who follow this calendar, COP29, the next climate COP in Baku is right upon us. A- and Matt and Vamsee, I'm gonna give you the chance to take us out here. We do see lots of evidence of the nature and climate agendas coming together, but how much do you expect related to nature and water in Baku? And, and what's your kind of hope for what's next on that front of how these agendas maybe come together and accelerate? Matt, you wanna go and then we'll give Vamsee the last word?

Matt Haddon: Yeah, sure. I mean, I, I think whilst there is a water day at COP29 in Baku, I- I'm not sure I'm expecting a great deal on the, the overall policy front. I think it's more a, a recognition that water is part of the climate conversation. So I think it's a start. I think the real interest, the real activity is gonna be in the corporate world. I think that's where businesses are feeling, feeling the pinch and seeing both the pinch increasing and the possibility, the opportunity that, that our colleagues from J.P. Morgan outlined so well on this podcast about spaces to finance new activity. And so, I, I think the corporate world will be where we see the real action, um, as it gets to grip with actual climate change.

Mark Lee: Mm-hmm. And Vamsee, where would you take that question about this overarching agenda and how water is perhaps a growing part of it?

Vamsi Alla: Yeah. Um, so I think like, I, I agree with, uh, what Matt was saying, um, at the COP29 itself, I don't expect there to be a lot of like, discussion on water, but I don't think that's a, that's a reason to like any disparate opinion. Um, i- if I look at the history of the past COPS, I would see that over the last, like, three to four climate COPS, uh, is where we've started seeing significant engagement from corporate sector and the investor sort of great private sector in this space. Uh, and I think that has, in my opinion, meaningfully, uh, increased the quality of dialogue between public and private sector and sort of how to find solutions in this area now. The biodiversity COP, this is the year where we are starting to see the inflection of increased participation from the corporate and the investor sector, right? So I think we should let that play out, uh, for a few more years. And I think things will catch up, uh, or that's the whole, and I think even in our paper we highlight, uh, this trend, right? Like, where the water topic is lagging the carbon topic by three to four years. But there's a lot of like, interesting nuances, differences. But the, the, the key one that I would like to think of is a lot of investment that happens in water tends to benefit the local areas immediately. You go build, like, more infrastructure in a particular area to improve the quality of water or increase supply, you will see the benefits in, uh, immediately, right? So I think I see again as an optimist in the same here I see all the signs pointing to increased interest from corporates, increased interest, interest from investors in the space, and that water will, um, will get the right share of, uh, interest and focus, uh, going forward.

Mark Lee: I think it's a really nice note to go out, Vamsee, that as big as these challenges are, I perceive this too, that the water and nature maybe have greater opportunity to make immediate sense to individuals and communities around the world about how they can help and, and benefit in sustainability terms in that climate can seem so abstract and so far from what individuals can do and what they can kind of touch and receive benefit from. So hopefully, the, the lag of those few years between the carbon and water and nature agendas, we'll see it close at an accelerating pace, and we'll really see the benefits of thinking about all those things together coming together over the next few years as well. It's time for me to go out, and thanks, uh, to all of you Prat, Vamsee as our partners in this research project, it was such a pleasure to work with you and your team throughout. Tess and Matt, equally the ERM team would great job, and, and, and great to be able to bring the parts of it together here for this conversation today. For those of you listening to us, all of the Sustainable Connections podcasts are on Erm.com. So if you've enjoyed this conversation and want to listen to other episodes, you'll find them there. If you're motivated to comment, we'd love to hear your feedback. With that, thanks once more to all the panelists and best wishes to all of our listeners.

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