Water sustainability of investors: Development and application of an assessment framework

Abstract

Although corporate social responsibility in general and corporate water stewardship specifically are of increasing concern to businesses, investors are lagging behind in fostering water sustainable investment practices – despite the large impact their investment decisions have on the state and shape of tomorrow's water resources. This paper is the first-ever study to assess whether and how investors include water sustainability criteria in their investment decisions, by scrutinizing their publicly released policies on the topic. We hereto (1) developed an assessment framework using the water footprint concept, (2) applied it to twenty large investors in a case study for the Netherlands, and (3) ranked them accordingly. We found that, by and large, water sustainability is a blind spot to investors, resulting in disclosed policies being neither well-demarcated nor clearly formulated, especially regarding the supply chain of the activities invested in. There is a long way to go before investors can ensure efficient, sustainable and fair water use in their investment policy, but our framework helps investors direct their urgently needed improvement process, to transition toward water sustainable production systems in a circular economy.

Full text

Water sustainability of investors: Development and application of an
assessment framework
Rick J. Hogeboom
a
,
*
, Ilja Kamphuis
a
, Arjen Y. Hoekstra
a
,
b
a
Twente Water Centre, University of Twente, Drienerlolaan 5, 7522NB, The Netherlands
b
Institute of Water Policy, Lee Kuan Yew School of Public Policy, National University Singapore, 259770, Singapore
article info
Article history:
Received 9 April 2018
Received in revised form
14 August 2018
Accepted 16 August 2018
Available online 17 August 2018
Keywords:
Water sustainability
Sustainable investing
Water footprint
Water disclosure
Corporate water stewardship
Corporate social responsibility
abstract
Although corporate social responsibility in general and corporate water stewardship specifically are of
increasing concern to businesses, investors are lagging behind in fostering water sustainable investment
practices edespite the large impact their investment decisions have on the state and shape of tomor-
row's water resources. This paper is the first-ever study to assess whether and how investors include
water sustainability criteria in their investment decisions, by scrutinizing their publicly released policies
on the topic. We hereto (1) developed an assessment framework using the water footprint concept, (2)
applied it to twenty large investors in a case study for the Netherlands, and (3) ranked them accordingly.
We found that, by and large, water sustainability is a blind spot to investors, resulting in disclosed
policies being neither well-demarcated nor clearly formulated, especially regarding the supply chain of
the activities invested in. There is a long way to go before investors can ensure efficient, sustainable and
fair water use in their investment policy, but our framework helps investors direct their urgently needed
improvement process, to transition toward water sustainable production systems in a circular economy.
©2018 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).
1. Introduction
Sustainable use of the Earth's finite freshwater resources is
imperative for future economic development (WWAP, 2017).
Without adequate water supply, factories come to a halt, food
production hampers, and eventually entire economies falter.
However, managing this precious resource wisely is not a
commonplace, as is illustrated by the World Economic Forum
(WEF) consistently ranking water crises in the top-three of sys-
temic risks posed to the global economy in terms of impact (WEF,
2017). Saliently, before 2010 water did not make it even to their
top-twenty. Reaching Sustainable Development Goal (SDG) 6 e
ensuring availability and sustainable management of water and
sanitation for all erequires a financial injection of at least US$ 2.6
trillion until 2050, part of which inevitably will have to come from
private investors (Kolker et al., 2016). Not acting on water sus-
tainability could diminish national growth rates by as much as 6
percent of GDP by 2050 (World Bank, 2016). On the positive side,
there are substantial opportunities for companies and investors
alike to start and fund (water) sustainable business models
(Damania et al., 2017), which can realise large sustainability gains
(Sumaila et al., 2017) at even no cost to risk and return (Utz et al.,
2015).
Recently, the corporate world started waking to the realisation
that improved water management is fundamental for future pros-
perity and human wellbeing (Roca and Searcy, 2012). Responses
and action initiatives include disclosure of water use and pollution
(CDP, 2015), identifying water risks (Larson et al., 2012), and
striving toward good water stewardship (Kelly, 2014) through
corporate certification schemes (AWS, 2017), developing business
platforms to share best and emerging practices (CEO Water
Mandate, 2017) and suggesting context-based water targets for
companies (Pacific Institute, 2017).
Regarding disclosure, CDP releases reports for investors seeking
assurance that their investments are well placed to generate
favourable returns and avoid value destruction because of negative
impacts on water systems (CDP, 2015). In their survey of over 1000
publicly listed companies, managing US$ 63 trillion in assets,
almost two-thirds of respondents reported exposure to substantive
water risk, both in their operations (2400 risks identified) and
supply chain (800 risks identified). However, the same survey
showed that only 11% of companies publish a company-wide water
*Corresponding author.
E-mail addresses: h.j.hogeboom@utwente.nl (R.J. Hogeboom), i.kamphuis@
alumnus.utwente.nl (I. Kamphuis), a.y.hoekstra@utwente.nl (A.Y. Hoekstra).
Contents lists available at ScienceDirect
Journal of Cleaner Production
journal homepage: www.elsevier.com/locate/jclepro
https://doi.org/10.1016/j.jclepro.2018.08.142
0959-6526/©2018 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Journal of Cleaner Production 202 (2018) 642e648

policy that includes, among others, the setting of performance
standards for both direct operations and suppliers. Beyond disclo-
sure, water scarcity and pollution may pose physical, regulatory
and reputational risks (Morrison et al., 2010). Companies are
setting up ways of dealing with such risks (Larson et al., 2012),
partly because of an intrinsic believe that action is needed, but also
eperhaps more cynically viewed ein an attempt to extend their
business’control over water resources or to protect their brand
name (Hepworth, 2012). Water stewardship, then, goes a step
further, by evaluating water use sustainability across the entire
value chain, the formulation of water consumption and pollution
reduction targets, an adequate implementation plan, and proper
reporting on all of the above (Hoekstra, 2014a).
While companies are thus trying to make current business
models more water sustainable or water-proof for the future, to
date, the role of investors is underexposed (V€
or€
osmarty et al., 2018).
Moreover, there are signs that the role of investors is modest at
best, as they are lagging behind in fostering and facilitating more
(water) sustainable business practices (Busch et al., 2016).
Despite these observations, a host of initiatives to help and
guide investors to become more sustainable emerged over the past
decade, each with its own approach, method and definitions. For
example, Responsible Investment (RI) eor Sustainable Responsible
Investment (SRI) eaims to integrate environmental, social and
governance (ESG) factors into investment decisions (Eurosif, 2016).
Such factors are often incorporated to a limited extent, due to lack
of trustworthy ESG indicators and data (Busch et al., 2016), and
varying collective beliefs on what RI ought to entail (Louche and
Dumas, 2016). Investors may also incorporate ESG or similar
criteria through Corporate Social Responsibility (CSR) programmes
(see Carroll and Shabana (2010) for a review and Oh et al. (2013) for
two case studies); by carrying out triple bottom line assessments
(Norman and MacDonald, 2004); by adhering to the United Nations
initiated Principles of Responsible Investment (UN PRI, 2017); or by
becoming certified by the Alliance for Water Stewardship (AWS,
2017). Topics encompass various sustainability domains, ranging
from child labour to carbon emissions, and from deforestation to
human rights. Although the long lists of both initiatives and topics
suggests that sustainability is high on investors’agendas, the gist of
recent literature reveals investor progress on water sustainability is
skin deep at best, hindered primarily by a lack of perceived urgency
about, a shared taxonomy on and meaningful indicators regarding
water sustainability of their investments.
The ill-addressing of water sustainability by investors is
particularly alarming in regard to future water issues, since the
economy of tomorrow is shaped to a large extent by choices made
by investors today. After all, investments today in new or updated
farms, firms and factories will have ramifications for future water
resource use and pollution. Failure by investors to transition from
business-as-usual to more sustainable water practices implies
water resources will continue to be further depleted, polluted and
needlessly wasted, while prolonged inconsideration of sharing
water resources fairly among users increases the likelihood of
conflicts. Current investment practices thus sustain unsustainable
water management (Lambooy, 2011), while rendering sustainable
production systems in a circular economy a utopian vista.
This paper aims to contribute to the slim body of knowledge on
how investors relate to water concerns, by investigating whether
and how investors currently include water sustainability criteria in
their investment decisions. Ideally, the facts on the ground are
assessed, namely the water sustainability of actually invested-in
projects or portfolios. Since such ground-truthing is an unreach-
able goal because of the inaccessibility of relevant data, we resorted
to drawing on policy documents released to the public to make the
assessment instead.
We developed and applied a framework to assess these policies
of investors regarding their incorporation of water sustainability
criteria. The application is done for a case study including twenty
large investors - banks, pension funds and insurers ein the
Netherlands. The assessment of investors’policies is concluded
with a ranking of the investigated investors, to distinguish leaders
and frontrunners from followers and stragglers, and to incentivise
investors to improve their business practice with regards to water
resources.
Although the focus is on Dutch (institutional) investors, the
scientific soundness and comprehensiveness of the proposed
framework render it suitable for wider application. Investors form a
major actor group that is being overlooked in contemporary water
management discourse. This paper provides a first and timely
attempt to systematically address the role investors play in
contributing to sustainable water use. By bridging the worlds of
investors and water managers, this study combines perspectives for
mutual learning.
2. Method and data
The method consists of three main parts: (1) the definition of
water sustainability in this study, (2) the development of a frame-
work to assess investors’investment policies on inclusion of water
sustainability criteria, and (3) the procedure of applying this
framework to twenty Dutch investors.
2.1. Water sustainability defined
In this study, water sustainability is defined along three di-
mensions of sustainability eefficient allocation, sustainable scale
and equitable distribution eas first proposed by Daly (1992), and
refined and tailored to water by Hoekstra (2014b). These three di-
mensions, encompassing economic, environmental and social
concerns, can be operationalized using the water footprint (WF), a
temporally and spatially explicit indicator of water consumption
and pollution (Hoekstra et al., 2011). The green WF represents
rainwater consumption of a human activity, the blue WF refers to
surface water and groundwater consumption, and the grey WF
provides a measure of water pollution. Using WF tools and these
three dimensions, connections between water use, economic
development, business practice, and social and environmental risks
can be better understood (Herva et al., 2011). The dimension of
efficient allocation of water can be operationalized by formulating
water footprint benchmarks per product or process; sustainable
scale by defining a water footprint cap per river basin; and equi-
table distribution by defining fair water footprint shares per com-
munity (Hoekstra, 2013). These dimensions have to be assessed in
both the direct operations of any prospective investment and its
supply chain, since in many cases direct water use comprises only a
fraction of supply chain water consumption (Linneman et al., 2015).
2.2. Framework development
A framework was developed to assess how investors’invest-
ment policies incorporate aspects relevant to sustainable use of
water. The framework is inspired by that of Linneman et al. (2015),
who developed a framework to assess water transparency of stock-
listed companies (rather than water sustainability of institutional
investors). The framework consists of nine categories elabelled A
to I and shown in Fig. 1 ewhich collectively cover criteria relevant
to water use and pollution associated with prospective in-
vestments. Each category contains three to seven equally weighted
assessment criteria, which are formulated as closed questions.
Answers to the questions result in a score of zero to two or three
R.J. Hogeboom et al. / Journal of Cleaner Production 202 (2018) 642e648 643

points per question, where a zero-point score indicates the investor
does not consider the criterion at all, and the maximum score etwo
or three points, depending on the question eimplies the investor
considers the criterion to its best capacity. We roughly followed a
progressive scoring approach, meaning that points can be scored
fairly easily on the first question within a category (e.g. testing if the
investor is aware of the particular criterion at all, without further
qualifications), but that scoring on subsequent questions becomes
increasingly difficult (e.g. questioning that goes beyond mere
awareness, testing if specific metrics are employed and/or evalu-
ated against set targets).
In order to aggregate criterion scores to the category level, the
sum of the points scored on each question within the category is
taken. The resulting total category score in points is subsequently
expressed as a percentage: a total of 0 points corresponds to a 0%
category score, while all points scored on the category questions
translates to a 100% score. This is done to avoid that categories with
more questions attain a higher weight. Thus, the final investor score
on water sustainability is calculated as the average percentage
score over all nine categories, where each category contributes an
equal weight of 11.1%.
Category A on “Policy Disclosure”assesses the transparency of
an investor regarding sustainability issues in its investment policy
in general and water sustainability specifically. Although reporting
is not the same as actually acting in a sustainable manner, disclo-
sure facilitates the enfolding of a debate on water, and allows the
general public to hold the investor accountable. This category is
prerequisite, since without disclosure scores cannot be assigned to
remaining categories. Questions range from whether the investor
discloses information on sustainability in general at all, to whether
the investor reports on following certain sustainability guidelines,
or frameworks or directives regarding water sustainability.
Categories B and C on “Water Accounting”cover the quantifi-
cation (measuring and monitoring) of water consumption and
pollution, both in direct operations and in the supply chain of the
activity created by the proposed investment. Accounting water use
and pollution is imperative in any complete assessment of water
resources, because water use or pollution reduction targets can
only be formulated once direct and indirect claims to freshwater
are known; you cannot manage what you do not measure. Water
accounts in and by themselves do not provide a comprehensive
indication of sustainable water practice; rather, such accounts serve
as a basis for the remaining categories, which relate to three di-
mensions of wise water use (Hoekstra and Wiedmann, 2014).
Categories D and E on “Efficient Water Use”concern the efficient
use of water resources by the activity emerging from the pro-
spective investment. Criteria range from simply showing awareness
of the notion of water efficiency in direct operations of an invest-
ment, to adopting benchmarking procedures in the supply chain
and setting reasonable water use and pollution targets against
which to compare water use and pollution caused by prospective
investment activities.
Categories F and G on “Environmental Sustainability”put the
water use and pollution resulting from an investment (as quantified
in categories B and C) in the context of locally available water re-
sources eboth at the location(s) of the direct operations and at the
locations where supply chain activities will take place. Questions
probe whether the investor considers potential water scarcity is-
sues, such as violation of environmental flow requirement in the
basin(s) where the activities are planned, and how it anticipates on
resolving these issues through response strategies.
The last categories H and I on “Social Equity”cover an investor's
awareness of and response to social equity concerns that may result
from the water use and pollution that will come along with the
activity targeted by the investment. Of interest are both community
concerns in the place(s) of the activity itself and community con-
cerns in the locations of the supply chain of the activity.
The questions in each category and a format for how points are
assigned to each question are enclosed in the Supplementary
Materials 1.
2.3. Framework application and ranking
The assessment framework is applied to the eighteen largest
investors in the Netherlands based on their asset value in 2016.
Asset values, viz. the worth of the investor, serve as a proxy for
assets under management of the investor (i.e. the total market
value of assets an investment company manages on behalf of its
clients). Although the latter is the preferred indicator of an in-
vestor's size, no unambiguous data could be retrieved for this
parameter. Asset values for 2016 are taken from the Dutch National
Bank (DNB, 2016). Since hardly any published policy briefs by pri-
vate investors are available to the public, selection eligibility was
limited to banks, insurance companies and pension funds.
Triodos Bank and ASN Bank were added to the subset of the
eighteen largest investors, on the basis of their perceived leading
role in sustainable investing and the accompanying expectation
that we might uncover examples of best practices by including
them. Although ASN Bank is a brand in the SNS Bank holding, it has
its own policies and operates independently. The resulting selec-
tion of twenty investors includes nine banks, five insurance com-
panies, and six pension funds, as listed in Table 1.
To assign scores to the criteria of the framework, we solely relied
on publicly disclosed information on an investor's investment
policy. We analysed information published or referred to by the
investor itself on its official websites, in both English and Dutch
languages, and on multiple webpage domains if applicable. All
webpages and (policy) documents were used which contained or
pointed to information regarding investment policy, water, sus-
tainability, and other relevant search terms such as Corporate Social
Responsibility, Environment Social and Governance factors,
Fig. 1. Assessment framework with nine categories.
R.J. Hogeboom et al. / Journal of Cleaner Production 202 (2018) 642e648644

Responsible Investing, Triple Bottom Line, and People Planet Profit.
For the selected twenty investors, we scrutinized 44 unique web-
sites and 226 relevant documents published on or linked to by
these websites. Webpages and documents thus found and analysed
are listed in Supplementary Materials 2.
The final investor score on water sustainability directly de-
termines the ranking of the selected investors.
3. Results
The ranking of the twenty selected Dutch investors on how well
they incorporate water sustainability criteria in their investment
policy is shown in Fig. 2. The colours represent the various cate-
gories of the assessment framework. Table 2 provides a more
detailed scoring overview, containing percentage scores per
investor per category.
The top-three highest ranked investors comprises NIBC Direct
(46%), Nationale-Nederlanden (39%) and ASN Bank (38%). The
following excerpt from NIBC Direct's policy illustrates its awareness
of the various dimensions related to water sustainability:
“At NIBC, we recognize that we operate in a complex world,
where climate change, water scarcity, biodiversity loss and popu-
lation growth create significant sustainability challenges and un-
precedented pressures on natural and human systems. The
increasing demand for - and scarcity of - resources may lead and
has led to conflicts, political and economic instability. We are
committed to take environmental criteria into consideration in our
business activities, including protection and conservation of
biodiversity and maintaining the benefits of ecosystem services.
(…) In addition to the risks and standards mentioned in our Sus-
tainability Policy and sector specific policies, NIBC considers the
following:
- Impacts on natural resources and ecosystem services;
- Pollution to air, water, and land resulting from the client's op-
erations (land or ground water); ( …)
- Environmental impact assessments and taking appropriate
measures to manage environmental impacts, including policies,
management systems, or supply chain criteria.”NIBC Direct
(2017).
The scores show that typically investors score highest in cate-
gory A “Policy Disclosure”, with an average score acrossinvestors of
72%. Of the remaining categories, those concerning direct opera-
tions yield substantially higher scores (average scores category B:
36%; D: 33%, F: 38%; H: 30%) than the categories assessing supply
chains (average scores category C: 3%; E: 8%, G: 8%; I: 3%). All in-
dividual investors score higher in operations than supply chain
categories as well. While thirteen out of twenty investors score
points in all four operations categories, only one (i.e. NIBC Direct)
scores points in all four supply chain categories. Moreover, eleven
out of twenty investors do not score any points in the supply chain
categories at all. The scores indicate that generally, the role of the
supply chain in water sustainability receives little to no attention in
investment policy.
Table 1
The twenty selected Dutch investors and their asset values in 2016 as taken from
DNB (2016).
Investor Name Investor Type Assets (EUR billion)
ING Bank bank 886
Rabobank bank 687
ABN AMRO Bank bank 416
ABP pension fund 384
PFZW pension fund 186
BNG Bank bank 163
NWB Bank bank 104
Nationale-Nederlanden insurance company 94
Aegon Levensverzekering insurance company 75
Shell Pensioenfonds pension fund 68
PMT pension fund 66
SNS Bank bank 64
a
bpfBOUW pension fund 57
REAAL insurance company 56
Achmea Verzekeringen insurance company 52
PME pension fund 43
ASR Levensverzekering insurance company 42
NIBC Direct bank 24
ASN Bank bank 11
b
Triodos Bank bank 9
a
Including ASN Bank assets.
b
Assets under management in 2016 (ASN Bank, 2016).
Fig. 2. Ranking of selected large Dutch investors on incorporation of water sustainability criteria in their investment policy.
R.J. Hogeboom et al. / Journal of Cleaner Production 202 (2018) 642e648 645

Regarding the type of investor, the pension funds score lower
than banks and insurance companies. Five out of six pension funds
are ranked in the bottom-six of twenty investors investigated.
There appears to be no noteworthy difference between the scores
of banks and insurance companies. Regarding the asset size of in-
vestors, no pattern emerges for the results either. Both smaller and
larger investors are ranked in the top-five, as well as in the bottom-
five.
4. Discussion
All assessed investors in some form express a willingness to
contribute to a more sustainable world by adopting or supporting
sustainability guidelines, frameworks or principles. All twenty in-
vestors, for example, are signatories of the United Nations' Princi-
ples for Responsible Investment (UN PRI, 2017). However, in
analysing policy documents to assign scores to water sustainability
criteria, it was found that their good intentions didnot trickle down
to effectuate clear water policy. In many cases, policy is formulated
in general, ambiguous, superficial or even meaningless terms (cf
Scholtens (2014)). For example, eleven out of twenty investors state
water considerations ein its widest sense einfluence their in-
vestment decisions, but without bothering to give any further
explanation. Alternatively, some (mainly low scoring) investors
publish several policy documents amply stressing the importance
of sustainability, but do not specify the role of water. Shell Pen-
sioenfonds, for example, only mentions the word ‘water’twice in all
sustainability documents investigated, and PME thrice. Apparently,
water does not have a place in their perspective on sustainability.
Another example is from SNS Bank's holding company De Volks-
bank, which mentions the word ‘water’32 times in its ‘Carbon
Profit and Loss Methodology’emore than in all of their other
documents combined ebut only in the context of translating water
consumption to CO
2
-equivalents (De Volksbank, 2016). Such
attention for detail regarding CO
2
is absent in their water policies,
and so is a definition or explanation of how exactly they account for
water use. In addition, many investors mention examples of a
reduction in water consumption of their investments in absolute
terms, conveying the impression of sustainable business practice.
However, without any further explanation or comparison, such
statements are meaningless. Only once consumption is considered
per unit of output and compared to benchmark values, meaningful
sustainable water practice can be claimed. ASR Levensverzekering's
real estate branch ASR Vastgoed provides an example of good
practice in this regard. In assessing a prospective investment,
”ASR Vastgoed performs a BREEAM assessment, which uses
recognized measures of performance set against established
benchmarks, to evaluate (…) a broad range of categories and
criteria. They include aspects related to (…) water use, ( …), and
pollution.”(UN PRI, 2015).
The less exemplary findings, however, confirm a study by Daub
(2007) of a decade ago, stating that disclosed documents may
provide only superficial information, using interchangeable ter-
minology and even leading to a value of the disclosed information
that “tends to hover around zero”.
Another finding that emerged from the assessment is that water
policy is often fragmented and lacking coherence. For all investors
with an above-average ranking, the scores are based on at least
three and up to ten different documents or webpages. No investor
received its total score solely based on a single document. Even if
dedicated water chapters were available, additional points could
still be assigned based on other documents. Because of the frag-
mentation of relevant information on water sustainability, it proved
cumbersome to isolate or define a coherent water policy for most
investors.
Related to the fragmentation is the ambiguity surrounding who
is responsible when an investor outsources the management of its
assets, especially if both asset manager and investor have their own,
potentially conflicting policies about dealing with water sustain-
ability. A similar confusion arises when an investor is a subsidiary of
Table 2
Overview of scores per assessment category.
Investor Name Type
a
Disclosure
A (%)
Water Accounting Efficient Water Use Environmental Sustainability Social Equity Total (%)
Operations
B (%)
Supply
Chain C (%)
Operations
D (%)
Supply
Chain E (%)
Operations
F (%)
Supply
Chain G (%)
Operations
H (%)
Supply
Chain I (%)
ABN AMRO Bank b 83.3 47.6 0.0 44.4 16.7 66.7 0.0 20.0 0.0 31.0
ABP p 83.3 14.3 0.0 8.3 0.0 20.0 0.0 0.0 0.0 14.0
Achmea Verzekeringen i 66.7 0.0 0.0 0.0 0.0 30.0 0.0 50.0 0.0 16.3
Aegon Levensverzekering i 100.0 21.4 0.0 33.3 8.3 40.0 0.0 20.0 0.0 24.8
ASN Bank b 66.7 57.1 0.0 61.1 0.0 60.0 20.0 60.0 20.0 38.3
ASR Levensverzekering i 66.7 52.4 0.0 77.8 0.0 20.0 0.0 20.0 0.0 26.3
BNG Bank b 50.0 42.9 0.0 0.0 0.0 10.0 0.0 0.0 0.0 11.4
bpfBOUW p 83.3 7.1 0.0 16.7 16.7 0.0 0.0 0.0 0.0 13.8
ING Bank b 66.7 52.4 0.0 88.9 0.0 40.0 0,.0 53.3 0.0 33.5
Nationale-Nederlanden i 66.7 47.6 0.0 44.4 16.7 73.3 40.0 60,0 0.0 38.7
NIBC Direct b 66.7 52.4 38.1 44.4 27.8 60.0 40.0 40,0 40.0 45.5
NWB Bank b 83.3 76.2 0.0 8.3 8.3 20.0 0.0 40,0 0.0 26.2
PFZW p 66.7 42.9 14.3 55.6 33.3 53.3 20.0 53.3 0.0 37.7
PME p 83.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.3
PMT p 83.3 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 10.4
Rabobank b 66.7 38.1 0.0 61.1 0.0 66.7 0.0 40.0 0.0 30.3
REAAL i 66.7 66.7 0.0 44.4 0.0 66.7 0.0 40.0 0.0 31.6
Shell Pensioenfonds p 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.6
SNS Bank b 66.7 38.1 0.0 33.3 0.0 53.3 0.0 26.7 0.0 24.2
Triodos Bank b 66.7 52.4 0.0 27.8 27.8 66.7 33.3 66.7 0.0 37.9
Maximum Possible Score 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Lowest Score 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.6
Highest Score 100.0 76.2 38.1 88.9 33.3 73.3 40.0 66.7 40.0 45.5
Average Score 71.7 35.5 2.6 32.5 7.8 37.8 7.7 29.5 3.0 25.3
a
b¼bank, i ¼insurance company, p¼pension fund.
R.J. Hogeboom et al. / Journal of Cleaner Production 202 (2018) 642e648646

a larger holding company, with similarly potential discrepancies in
individual policies. Even in absence of such institutional difficulties,
is was often unclear which documents should be leading, if frag-
mented documents contradicted each other. As a rule, scores were
assigned based on the most favourable documents. That being said,
some investors have dedicated ‘green’or special focus funds with
stricter policies than the parent company or other funds held by the
investor. In such cases, we let the policy representative of the
majority of the investors' activities be guiding in assigning scores.
In any case, the complexity of the investors' organizational set-up
should not inhibit sustainable water practice (Lagoarde-Segot and
Paranque, 2018).
Some investors include water aspects in their policy not
assessed by our framework, such as flooding, sea level rise, biodi-
versity and hydroelectricity. These were not the focus of our
resources-based assessment, but relevant nonetheless to different
sustainability contexts.
While the focus of this study is the investor's consideration of
water sustainability criteria in prospective investments, some in-
vestors report on water use of their own in-house operations.
Rabobank (2015) and Aegon (Aegon Asset Management, 2016), for
example, both explicitly account for water use in their offices.
Although a praiseworthy exercise, the arguably much larger water
use by their investments is largely left unnoticed.
The scoring of investors is based disclosed policies rather than
on actual ground-truthed performance, which limits the interpre-
tation of our resulting water sustainability assessment. Moreover,
in addition to disclosed policies investors may comply with inter-
nal, possibly confidential procedures. Aegon, for example, hints to
the existence of internal procedures in an informal Q&A interview
format presented in its Responsible Investment Report 2016 (Aegon
Asset Management, 2016). If included in our assessment, these
internal documents, might have given rise to higher scores than
assigned in this study. On the other hand, publicly available docu-
ments might keep up appearances of actual investment practice,
indicating too high scores might have been assigned.
The ranking of investors based on the assessment framework is
subjective to some degree. Firstly in the composition of the
framework itself, but also in the weighting of categories and the
scoring within each category. While the former is an inherent
design consequence, for the latter two, a closer look at the distri-
bution of points scored over the nine categories shows that in-
vestors with a high total score received this score based on points
assigned in multiple categories. No investor that scores high points
in operations categories outranks investors with fewer points
spread over both operations and supply chain categories. We would
not expect differently, since typically investors start considering
supply chains only after covering water criteria in direct operations.
A change in weighting may therefore alter the absolute scores, but
will affect the ranking only to a limited extent.
Future research may refine, test and build upon our framework
and findings, especially in capturing and describing intricacies
related to which policies are guiding in practice, how these policies
are applied, and the actual ground-truthing of water sustainability
of activities invested in. This may for instance be done in a case
study setting, where collaboration is sought with selected investors
and their local investees.
Few rankings of Dutch investors are available for comparison. In
the Fair Finance Guide (FFG) ranking of general sustainability of
Dutch financial institutions, ASN Bank, SNS Bank and Triodos Bank
score high points, followed at a distance by NIBC Direct, in the
category ‘Climate Change’(Brink et al., 2016a). In FFG's insurers
subsection, Nationale-Nederlanden is in the bottom of the list
(Brink et al., 2016b), while they lead the water sustainability
ranking in our study. The main reason for the difference in rankings
appears to be the main focus of FFG on CO
2
reduction measures,
while we confined ourselves to water criteria.
Although the framework is applied to Dutch banks, pension
funds and insurance companies, it can readily be used for other
countries and types of investors as well. The framework provides a
reference for the inception of new investment policy on incorpo-
rating water sustainability criteria, or for uptake in Corporate Social
Responsibility practice or ESG frameworks (Peir
o-Signes et al.,
2013). Given the plethora of sustainability frameworks, principles
and standards available, and the resulting dilution of focus (Krajnc
and Glavi
c, 2005), the water sustainability criteria of our frame-
work are preferably integrated with existing efforts on developing
common taxonomies, such as e.g. those by the Pacific Institute
(2017).
Since certain sectors, such as the Food and Beverage industry
and Mining, are more water-intensive or susceptible to water risks
ein either their operations or supply chain ewe recommend in-
vestors to start implementing water sustainability criteria specif-
ically in these sectors (Rueda et al., 2017). Some investors, such as
ABN AMRO (ABN AMRO, 2017) and Aegon Levensverzekering
(Aegon Asset Management, 2016), already formulate their
Responsible Investment policy- including water aspects - sector-
specific.
5. Conclusion
The state of water resources in the future greatly depends on the
extent to which investors today include water criteria in their in-
vestment decisions. This study set out to find out how investors
include water sustainability criteria in their investment decisions,
thereby contributing to the body of knowledge on how the
currently overlooked and under-addressed actor group of investors
relate to water concerns.
The main conclusion is that despite their expressed good in-
tentions, the low total score of even the highest scoring investors in
the Netherlands (<46%) indicates that their ambitions have not
trickled down (yet) to effectuate clear water policy. Investors score
points on disclosure and reporting -the first, readily doable step -
but that in itself does not guarantee actual water sustainable in-
vestment practice. Assessing numerous policy documents revealed
that, by and large, disclosed policy on water sustainability is neither
well-demarcated nor clearly formulated. This confirms earlier ob-
servations by Scholtens (2014),Lambooy (2011) and Daub (2007),
and bolster scepticism about an imminent and prompt transition to
water sustainable production systems in a circular economy. That
being said, preliminary but promising water policies, such as that of
frontrunner NIBC Direct, or a sector-specific approach as pursued
by ABN AMRO and Aegon Levensverzekering, lead the path in the
right direction and deserve recognition.
The practice of accounting for water use and pollution in both
operations and supply chains of the activities emerging from pro-
spective investments is imperative, but we found that especially
the supply chain part of the value chain is being overlooked by most
investors. In addition, low scores in Categories D eI(Table 2) show
that investors are still a long way from guaranteeing that their
prospective investments safeguard efficient water use, fit a sus-
tainable scale, and ensure a fair sharing of limited water supplies.
Moreover, we discovered how a lack of mutual understanding
and exchange between the investor community and the water
management community inhibits the development of sound,
practical and science-based water investment policy. Concurrently,
increased collaboration may hold the linchpin for developing water
sustainable investment practices. The assessment framework
developed and applied in this study is a first attempt to straddle the
gap by providing investors with systematic handles to give
R.J. Hogeboom et al. / Journal of Cleaner Production 202 (2018) 642e648 647

substance to their own improvement process to incorporate water
criteria into investment decisions. In the end, the purpose of
assessing and ranking investors is to incentivise them to improve.
In light of the severity of water issues faced today, we stress the
urgency to take action, both specifically toward incorporating wa-
ter criteria into investment decisions and generally toward more
water sustainable economies.
Acknowledgements
This work was partially supported by NWO Earth and Life Sci-
ences (ALW), project 869.15.007. The work was partially developed
within the framework of the Panta Rhei Research Initiative of the
International Association of Hydrological Sciences (IAHS).
Appendix A. Supplementary data
Supplementary data related to this article can be found at
https://doi.org/10.1016/j.jclepro.2018.08.142.
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