WWF, in conjunction with Water Foundry, is developing its own water valuation tool to explore how a portfolio’s water risk exposure may potentially affect financial value. It will be an offline, Excel-based, user-guided calculator that allows users to stress test financial information under different water-related scenarios and generate a discounted cash flow analysis. The tool will be powered by CDP’s Water Security database, which draws upon thousands of real-world data points to link key water risk events to different types of financial impacts reported by companies over the past 4 years.
The Water And ValuE (WAVE) tool will rely upon a few primary inputs:
1. Water risk event probabilities: these baseline conditions are partially (& automatically) generated from the user’s Water Risk Filter assessment results (which draw upon state-of-the-art basin water risk data). Additional probabilities can be then added.
2. Water-related scenarios: these harness modelled data, informed by established shared socioeconomic pathways, to vary risk event probabilities
3. User financial data: these data, which are recognized as sensitive and often confidential, are able to be added by the user on their own desktop
4. Financial impact ranges: which is derived from a mix of user input and CDP’s Water Security database (2014-2018) to appropriately scale impact ranges
This new valuation tool will more rigorously analyze how water risks can affect the financial value of assets, enabling companies and investors to evaluate the potential financial impacts of water events on their operations, supply chains or investments, and also better evaluate opportunities to invest in net present value positive initiatives.