Financial services company Jefferies published a report on water supply issues in the mining sector today, warning they will continue to worsen as climate change and resource consumption exacerbate water scarcity around the world.

Businesses are taking notice: corporate mentions of water risk increased 40% in 2020, according to financial data provider Refinitiv.

Mining is a water-intensive process, being used for mineral processing, dust suppression, slurry transport and employees’ needs.

Jefferies noted that “miners that reduce the water intensity of their operations as part of a broader focus on ESG will be rewarded with premium equity valuations over those that operate in a less sustainable way.” Cited strategies include identifying site-specific opportunities for efficiency improvements and investing in recycling and desalination efforts.

Jefferies also drew attention to the expected regulatory tightening of water consumption given the pressures of climate change, failing infrastructure, water pollution, and increasing political will, providing an added incentive for mining companies to be proactive in their water management or risk getting caught flat-footed when water regulations are eventually enacted.

Due to public pressure on businesses to take environmental issues more seriously, the mining industry, like the corporate sector in general, is taking steps to become more sustainable. Last week, gold-mining company Newmont became the first in the industry to issue sustainability-linked bonds.