Business News: Wildfires are putting water supplies at risk, and corporate America is scared

As wildfires tear across America’s West, the immediate risk is to life and property, but they will eventually affect water supplies.

That’s one reason large corporations are beginning to help fund forest restoration in order to mitigate their water risk. 

The water supply for many communities, including large cities, starts in mountains and national forests. In California, about 70% of the water either starts or flows through national forests, according to Forest Service estimates.

“When we have large-scale fires like this, we get huge amounts of erosion that end up filling up the dams and reservoirs that store water and that help create hydropower,” said Eli Ilano, forest supervisor for the Tahoe National Forest. “That is why there is a huge sense of urgency to do work in the forests, thin and restore them, in order to make them more resilient to climate change and to these large-scale, catastrophic fires.”

After large-scale forest fires, mudslides often follow, filling reservoirs, contaminating their water and reducing their capacity. Cleaning the reservoirs is costly and time consuming. And it’s not just the mud.

Trees also help retain the water in the mountains and then slowly release it so that dams and reservoirs don’t have to face a sudden influx of water.

Companies are now coming around to the idea that they need to help fund forest preservation to protect water supplies that are essential to their business.

“Corporations in all sorts of different sectors, in the beverage sector, agricultural sector, tech sector, they’re all taking this quite seriously and looking at how they can be part of the solution,” said Todd Gartner, director of Cities4Forests and WRI’s Natural Infrastructure Initiative.

In the technology sector, for instance, many data centers, which need water to cool the banks of computers running inside, are in water-stressed areas. For other product manufacturers, water is crucial to every aspect of the process.

“Water is essential to our business. We need it to manufacture our products, and we need it to use our products in homes,” said Shannon Quinn, global water stewardship leader for Procter & Gamble.

In just the last year, Procter & Gamble provided a $200,000 grant to restore 400 acres in the Eldorado National Forest, which feeds the water supply of Sacramento and San Francisco Bay Area cities.

“Business has a responsibility to address these issues. And for water specifically, I think it’s really a matter of identifying those areas where your business may be at risk,” said Quinn.

Two years ago, the nonprofit Blue Forest Conservation organization launched the first ever Forest Resilience Bond at $4 million. 

“It is really a public/private partnership where we’ve engaged investors like pension plans, insurance companies … even impact investors like foundations, to help cover the upfront costs of doing this much-needed forest restoration work with the primary goal of reducing the risk of catastrophic wildfire,” Blue Forest founder Zach Knight said at the time.

Private capital was used to thin and restore about 15,000 acres in the Tahoe National Forest. Investors are being paid back by local water and hydroelectric utilities. 

Now, working with the World Resources Institute, Blue Forest is about to launch its second Forest Resilience Bond, aimed at 48,000 acres of forest restoration.

The $25 million value is more than six times the first issuance, and investor interest is so strong that there is already about $200 million more in the pipeline for additional bonds, according to Knight.

The return on the Forest Resilience Bond is only about 4%, but investors are more interested in lowering their risk from costly droughts and disruptions to their water supply.

 While most of the investors initially are foundations and pension funds, Gartner says large corporations are now at the table, planning to invest in the next offerings. He said he could not name them.

 “They are increasingly interested in how this fits into their water targets, into their community benefit goals, and how they can leverage the investments of the government, of utilities, and even other businesses to get this work done at scale and to take advantage of the leverage of multiple actors working for large scale impact,” he said.

The Eldorado National Forest is being affected by the Caldor Fire, which has burned more than 200,000 acres and is threatening the resort town of South Lake Tahoe in California. The state has closed all national forests to public access through at least Sept. 17 to reduce fire risks and ensure the safety of firefighters.