California’s Betty Yee on water risk

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Betty YeeTo highlight the escalating global water crisis, this year’s UN World Water Day on March 22 will focus on valuing water. With water demand expected to exceed supply by 56% within the decade, companies, investors and institutions are being called on to not only recognise the challenges of pricing water appropriately, but consider the social, environmental and cultural value of water. 

To address this growing concern, sustainability nonprofit Ceres partnered with the Government of the Netherlands’ Valuing Water Initiative to form the Valuing Water Finance Task Force, a coalition of influential investors who seek to drive corporate action on water-related financial risks. In this series, Valuing Every Drop, members of the Task Force will be explaining how they think about water risk.

Today, Ceres’ Director of Water, Kirsten James is speaking to Betty Yee, who was first elected as California State Controller in November 2014 – a position that serves as the state’s chief fiscal officer. She also chairs the California Franchise Tax Board and serves as a member of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) Boards, representing a combined portfolio of nearly $500bn. She speaks about how her experience managing the world’s fifth-largest economy has shaped her thoughts on climate and water risk. 

Why did you join the Valuing Water Finance Task Force? What do you hope the new Task Force will accomplish?

Investors have made a great deal of progress measuring both physical and financial transition risks in their portfolios related to carbon emissions. I believe water risk – including water scarcity, quality, and threats of floods – must also be measured, disclosed and mitigated by the companies in which we invest. I am hopeful the Task Force can help call attention to the importance of water risk and articulate a set of shared expectations for companies to value water. Concise and scientifically-backed expectations will also go a long way toward uniform disclosure and help investors adequately measure and manage water risk in our portfolios. Clear expectations that align with high-level water risks and metrics akin to the Paris Agreement targets would help make corporate engagements around water more effective.

What aspect of the water crisis is most concerning to you as Controller and board member of the two of the largest US pension funds? 

I view the water crisis as an economic and humanitarian crisis with potentially staggering costs to our society. Recent studies present a bleak picture if we fail to take strong action now. By 2035, water supply from snowpack may decline by as much as two-thirds. California agricultural production – which supplies 13% of produce in the US – could face…