Weak pricing signals. Poor accounting. Byzantine rules. These are just a few of the reasons why California is in the midst of a water crisis. A lack of rainfall is perhaps the least of the state’s problems.
California’s situation is symptomatic of escalating water risks all across the world, where water is typically undervalued and, as a result, used incredibly inefficiently as more people than ever need it.
“There’s no room to hide anymore, this is where finance hits reality,” said Piet Klop, senior advisor of responsible investment at Dutch pension fund manager PGGM, who spoke with me recently about escalating water risks globally.
At meetings I attended across the state this month with water-savvy investors, the California drought always loomed large. In addition to fallowed farmland and depressed earnings, they acknowledged a larger more profound reality—the devastating drought and growing climate change impacts are likely the “new normal” for California.