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Watered down? Investigating the financial materiality of water-related risks in the financial system

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Listed:
  • Lylah Davies
  • Mireille Martini

Abstract

Water-related risks are intrinsically linked to both climate and nature challenges and can be closely tied to socio-economic challenges, such as poverty, food security, and domestic and international conflicts. There is increasing evidence that water-related risks are financially material across actors in the financial system, and further still, that there may be important implications for financial stability. However, a review of current practices indicates that these risks are not fully captured by current approaches to assessing risk. This working paper explores how the financial sector understands the concept of financial materiality as a lever for decision making on water-related climate and nature risks. The paper also looks at how regulatory and supervisory guidance considers water in the context of climate and nature risks, and finally how sustainable finance tools and initiatives can support market participants in gaining an improved understanding of water-related risks.

Suggested Citation

  • Lylah Davies & Mireille Martini, 2023. "Watered down? Investigating the financial materiality of water-related risks in the financial system," OECD Environment Working Papers 224, OECD Publishing.
    • Handle: RePEc:oec:envaaa:224-en
    DOI: 10.1787/c0f4d47d-en
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    More about this item

    Keywords

    economics; finance and investment; financial materiality; water; water finance; water-related risks;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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