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

Lylah Davies and Mireille Martini

No 224, OECD Environment Working Papers from OECD Publishing

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.

Keywords: economics; finance and investment; financial materiality; water; water finance; water-related risks (search for similar items in EconPapers)
JEL-codes: E60 F30 G10 G20 Q25 Q28 (search for similar items in EconPapers)
Date: 2023-09-28
New Economics Papers: this item is included in nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:oec:envaaa:224-en

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