Context: According to the report by Moody’s Investors Service, Asia is generally more vulnerable to water risks than other regions where water scarcity or mismanagement is already prevalent.

• Across sectors, issuers are facing water management issues such as inadequate access to clean or purified water supply, and reputational and regulatory risks related to the downstream effect of water use, including supply, pollution and sanitation.

As per report

• The risks are more pronounced for water-intensive sectors like mining, agriculture and power. 
• Climate change will amplify the challenges and make water management a more pertinent credit risk, as well as heighten geopolitical risks and trade tensions.

The risk factors include 

• The availability and cleanliness of water;
• The adequacy of water transport and treatment infrastructure;
• The impact of economic activity on supply and pollution, and 
• The effect of regulations

Water management risks tied to the existing supply and quality issues, as well as risks amplified by climate change, pose credit challenges across multiple sectors in Asia, particularly in parts of South and Southeast Asia.
Key Impact

• The link between non-climate-related water risks and the effects of climate change will become clearer over time as changing rainfall patterns and drought amplify water scarcity and infrastructure deficiencies.
• For sovereign nations, water stress and poor sanitation can weaken their growth outlook, as well as add to fiscal costs and social tensions.
• It also affect financial institutions indirectly, since the risks affect the borrowers’ creditworthiness. 
• Further these risks may bring more impaired assets, increased insurance claims related to issuers’ water supply constraints, and tighter regulations in water-scarce regions.