Water stress poses credit risks for coal, mining and power sectors: Moody’s

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Water management is among the top environmental risks for countries and sectors in Asia, according to Moody’s Investors Service. Out of 25 economies in the region, he identified 10 that have very negative or very negative exposure to water management risks – including India, Pakistan, Bangladesh and China.

Moody’s said Asia presents one of the highest water management risks in the world, on par with arid countries in sub-Saharan Africa and the Middle East, despite high levels of seasonal rainfall and large river systems across the continent which provide an abundant supply. The exposure is most pronounced in South and Southeast Asia, where access to water, scarcity and sanitation are key factors.

In this sub-region, the annual freshwater withdrawal represents 50 percent of the available domestic supply and 43 percent of the population is on average exposed to unsanitary water, suggesting weak resource management infrastructure. water available. In contrast, average freshwater withdrawals represent only 20 percent of the available supply in Western Europe and 10 percent in Latin America and the Caribbean.

Moody’s said it considers five main channels of water management risk transmission for issuers in Asia, particularly for those in industries where access to fresh or clean water is crucial for productivity, or where reducing downstream pollution is essential to reduce side effects on public health and mitigate regulatory risk. These channels include availability, access and consumption; scarcity linked to insufficient infrastructure; downstream pollution by users; sanitation; and risks related to pollution regulations.

Availability, access and consumption These factors are among the broadest sets of risks by impact, related to an excessive demand on limited water resources which signals poor management of existing resources, low availability of fresh water (as in island economies) or water diversion (through dams). Even in economies with abundant water, competition for water can intensify between sectors of the economy, Moody’s said.

Sectors affected include agriculture, chemicals, semiconductors, power generation, and industries that use water for cooling, such as indoor nuclear power plants and coal-fired power plants which have less access to seawater. Industries that are heavily dependent on water naturally tend to be located near water sources, although increasing competition for these resources due to population growth may also reduce access.

In Asia, Moody’s said, the countries most exposed to water management risks also tend to be large agricultural producers, as these banking systems face significant lending risks for agricultural sectors. This is the case in India, China, Vietnam, Laos, Cambodia and Bangladesh where, in many cases, credit to agriculture and fisheries reflects the importance of sectors for employment and as a political basis, and can often be a by-product of subsidized interest rates. and priority sector loan quotas.

However, these risks may arise for specific specialist agricultural lenders rather than for banking systems as a whole. (ANI)

(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


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