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Water-related disclosures increased significance for publicly traded Asian businesses

Increasing emphasis on water disclosures among listed Asian corporations, with Malaysia's burgeoning data centre industry potentially heightening investor interest in water risk disclosures, particularly within the technology sector.

,   and  Administrator
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Water disclosures becoming increasingly significant for publicly listed Asian corporations
Water disclosures becoming increasingly significant for publicly listed Asian corporations

In a significant move towards environmental sustainability, Malaysian authorities have introduced regulations for the water usage of data centers in 2023. However, the specific regulatory body responsible for overseeing these regulations remains undisclosed.

The new regulations come at a time when demand for water-related disclosures is on the rise. According to recent data, there was a 122% increase in requests for water-related data from tech giants like Apple, Amazon, and LG, among others, compared to the previous year.

These disclosures are expected to detail how corporations' water policies and strategies will be delivered against set baselines, and the resources needed to do so.

Malaysian Companies Leading the Way

Several Malaysian-listed firms have already taken the initiative to set water-related targets. Sime Darby Plantation, for instance, is one of the 45 companies in Malaysia that has disclosed water-related data to CDP, representing a 27% response rate among requested companies.

Other notable Malaysian companies making water-related disclosures include Sime Darby Plantation, which has set water-related targets, and Sunway, which has pledged to reduce overall water intensity by 10% by 2030 against a 2015 baseline. However, it's worth noting that the water intensity for Sunway's managed assets has increased by 16% from the baseline year.

The rapid expansion of data centers, driven by artificial intelligence (AI), is expected to have a significant water footprint. To address this, companies can repurpose existing disclosures to meet domestic requirements by reporting against globally recognized frameworks such as the Global Reporting Initiative's standards or the CDP's water security questionnaire.

Companies should also identify their material water-related risks and opportunities by adopting a basin-scale approach, considering water as a shared resource, and its different business activities as well as operations along the value chain.

Regulatory Developments and Future Outlook

Singapore's President Tharman Shanmugaratnam has advocated for water disclosures that include the impact of a company's operations on water ecosystems to be built into existing carbon reporting rules. Meanwhile, in Malaysia, regulators are starting to look into stricter rules for the water use of data centers due to the robust growth of the data center sector.

In February, Malaysia's water regulator warned that those eyeing to build data centers in the country must tap alternative water sources to ease pressure on the public water supply. Listed companies can reference Bursa Malaysia's ISSB-aligned sustainability reporting framework, which includes mandatory water-related disclosures for specific sectors.

Where disclosure gaps remain, the firm must include measurable objectives and a timeline to address them. As of 2023, 156 Southeast Asian companies have responded to CDP's water security questionnaire, with the manufacturing industry having nearly half of its sector's companies making water-related disclosures.

Aviation companies, like Qantas Airways, Ryanair, Jetblue, and easyJet, have also been asked by financial institutions to disclose data on water contamination from jet fuel leakage and the sector's extensive use of de-icing fluids.

In conclusion, the introduction of water usage regulations for data centers in Malaysia marks a significant step towards environmental sustainability. As more companies disclose their water-related data and strategies, it is hoped that water consumption will be reduced, and the impact on water ecosystems minimized.

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