Sustainability Insights research shows why more Mexican states could face water stress by 2050

Mexico City (S&P Global Ratings) April 4, 2023 — According to the European Environment Agency, water stress occurs when demand for water exceeds available supply or when poor water quality limits its use. S&P Global Ratings believes Mexican states’ exposure to high water stress, if not addressed, could affect the country’s long-term economic growth.

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More Mexican states may face water stress

In a Sustainability Insights research paper published today, “More Mexican states could face water stress by 2050,” we sought to better understand Mexico’s potential exposure to this environmental risk and the scale of its distribution across the country. The scenarios presented in this paper provide insight into the potential exposure of Mexican states to specific physical climate risks represented by water stress.

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Here are the key findings:

  • The number of Mexican states exposed to high water stress will almost double to 20 (about 60% of states) by 2050, from 11 (34%) in 2020, for all scenarios included in our analysis, without adaptation measures.
  • States facing the greatest risk are already water-scarce and economic growth could decline as the frequency and severity of droughts increase
  • In the long term, increased investment in water infrastructure may weaken the budgetary viability of some states and municipalities and result in higher debt, but may go some way to building resilience to water shortages.

Stressor scenarios reflect shared socio-economic pathways (SSPs) from the Intergovernmental Panel on Climate Change, which encompass broad changes in socio-economic systems. The paper presents results for SSP2-4.5 through 2050–a moderate emissions scenario–with historical emissions often showing small differences in SSP for mid-century.

This study explores the water stress exposure of Mexican LRGs over the next 30 years using S&P Global Sustainable1’s climate change physical risk dataset. S&P Global Sustainable 1 is separate and distinct from S&P Global Ratings. Certain activities of these business units are kept separate from each other to protect their respective independence and objectivity.

*This report does not constitute a rating action.

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