Sustainability Insights Research Shows Why More Mexican States Could Face Water Stress By 2050

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MEXICO CITY (S&P Global Ratings) April 4, 2023 — Water stress occurs when demand for water exceeds available supply or when poor water quality restricts its use, according to the European Environment Agency. S&P Global Ratings believes Mexican states’ exposure to high water stress, if left unaddressed, could influence long-term economic growth in the country.

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More Mexican States Could Face Water Stress

In the Sustainability Insights Research paper published today, "More Mexican States Could Face Water Stress By 2050," we sought to better understand the scale of Mexico's potential exposure to this environmental risk and its distribution across the country. The scenarios presented in this paper provide insight into the potential exposure of Mexican states to the specific physical climate risk represented by water stress.

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, under all scenarios covered in our analysis, without adaptation measures.
  • States facing the greatest risk are already short of water and may experience decreased economic growth as the frequency and intensity of droughts increase.
  • An increase in investments in water infrastructure over the long term could weaken some states' and municipalities' budgetary performance and result in higher debt, but go some way to building resilience to water scarcity.

The stress scenarios reflect Shared Socioeconomic Pathways (SSPs) from the Intergovernmental Panel on Climate Change, which incorporate broad changes in socioeconomic systems. The paper presented findings as of 2050 through SSP2-4.5--a moderate emissions scenario--noting often small differences among the SSPs for the midcentury, owing to historical emissions.

This research used S&P Global Sustainable1's Climate Change Physical Risk dataset to explore Mexican LRGs' exposure to water stress over the next 30 years. 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 in order to preserve their respective independence and objectivity.

*This report does not constitute a rating action.

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