Water Intelligence Center (beta version - not for commercial use)
The waterBeta™ Solution –
Understanding the Financial Impact of Water Risk Exposure
waterBeta™ = ƒ(TRMI, waterIQ™)
The combination of corporate water intelligence and relative price elasticity of a company benchmarked to its
industry results in a tail volatility risk metric that is informed by actual water risk exposures. It represents
excess volatility and value currently not captured in the market, due to opportunity cost. By addressing water
risks, and building resiliency, waterBeta™ allows for companies to understand market value and
earnings per share (EPS) ‘left on the table.’
TRMI – Tail Risk Market Index™
The TRMI provides a measure of price behavior and response to tail risk events in the market. Since water risk
events manifest themselves as short term, high volatility, impacts on price, and differ from industry to industry,
the TRMI needed to be granular to line of business and exhibit short time series. It is measured as
the VaR ratio of the asset relative to that of its industry (or sub-industry) benchmark, multiplied by the
correlation factor of price behavior between asset and benchmark.
waterIQ™ = ƒ(FAR™, WPE™, GBRI™)
How an equity responds to create operational and market value depends on how well the company understands its
risk exposures and efficiency characteristics related to this economic input. The overall waterIQ™
of the firm is the foundation for corporate water or climate resiliency and comprises the full factor analysis
based on a weighted integration of fractional asset risk, water productivity economics and governance & brand
FAR – Fractional Asset Risk™
Not all corporate facilities are equally impacted by water risk but are geographically and operationally distinct.
Manufacturing, distribution or retail facilities exhibit different input constraints, and watersheds or catchments
are managed differently depending local or regional regulations and stakeholder demands. The FAR is computed by
taking into account asset-specific features, the fraction of assets exposed to low recharge conditions, and the
imputed impact that mitigation strategies have on direct costs.
WPE – Water Productivity Economics™
The efficiency with which water is used as a natural resource input for revenue or sales growth and facility
operations impacts economic output and the likelihood of an asset becoming stranded (no longer able to earn an
economic return). Equarius® deploys machine learning factor models to predict water intensity by sales and by net
fixed assets, benchmarked to weighted industry sector values, to estimate economic productivity dependencies on
GBRI – Governance & Brand Risk Index™
Equarius® recognizes that economic productivity and price behavior alone do not convey the entire value of water
in the corporate culture, governance and brand management. To reflect differences between equities, ESG
characteristics are considered to correct for intangible values related to environmental, social and governance
pillars in the corporate organization.
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© 2021 Equarius Risk Analytics® LLC