Water mismanagement a credit risk in Asia: report

Risks are most pronounced for water-intensive sectors such as mining, agriculture and electricity

TBS Report

September 15, 2021, 10:05 PM

Last modification: September 16, 2021, 2:03 PM

Representation image. Photo: Collected


Representation image. Photo: Collected

Water management risks related to supply and quality issues, as well as climate risks, are causing credit problems in several sectors in Asia, according to a new report from Moody’s Investors Service.

The report released on Wednesday says the risks are higher, especially in parts of South and Southeast Asia, where water scarcity and mismanagement are prevalent.

“Asia is generally more vulnerable to water risks than other regions,” said Nishad Majmudar, assistant vice president and analyst at Moody’s.

“Across industries, issuers face water management issues such as inadequate access to a clean or purified water supply, and reputational and regulatory risks associated with the downstream effect of water use, including supply, pollution and sanitation, ”he noted.

Moody said the mismanagement of water resources has direct implications for Asia’s economic activities, with negative effects across all sectors.

“Water-intensive sectors such as mining, agriculture, textiles, semiconductors, and hydropower and thermal power depend on proper water management for their productivity. social tensions, ”notes the report.

He said that water management risks also affect financial institutions indirectly, as the risks affect the creditworthiness of borrowers. Over time, these risks can lead to more impaired assets, increased insurance claims related to water supply constraints from issuers, and more stringent regulations in areas with water scarcity.

As climate change progresses, poor water management will become a greater credit risk. According to the report, the link between non-climate-related water risks and the effects of climate change will become clearer over time, as changing precipitation and drought amplify water scarcity and water shortages. infrastructure.

“These dynamics could intensify geopolitical risks and trade tensions, with negative credit effects,” he concluded.

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