By Brooke Barton

What's one thing the Sisters of Mercy and the titans of Wall Street have in common? A deepening realization of water's fundamental value.

My colleague Berkley Adrio and I had a chance to witness this first hand this month in New York City, where on opposite sides of the city, we saw vexing questions about the nature of freshwater's value being debated by religious investors, mainstream asset managers, community activists and multinational corporations.

Downtown, Goldman Sachs co-sponsored an event, 'Water: Emerging Risks and Opportunities', with GE and the World Resources Institute. Despite the winter mess outside, nearly 300 asset managers, water infrastructure and energy sector executives came to learn about opportunities for investing in water and the growing water demands of the United States' booming unconventional energy sector.

Uptown, the Interfaith Center for Corporate Responsibility - an organization with an impressive 40-year track record of faith-based shareholder activism - convened a roundtable on the obligations of companies to respect the human right to water. Seventy religious investors, major water-intensive companies, and grassroots activists from around the globe came together to tackle the question of what companies can and should do to ensure their operations "do no harm" to water supplies of local communities.

Investors at the Goldman event who are allocating capital to "water solutions" very well may be driving the green technologies that can help the industrial companies at the ICCR session clean up their acts. But the problem for companies is that in most places, water is so cheap that investing in these solutions can sometimes be hard to justify on a traditional ROI basis, if not on a moral one.

So what is water's worth? Your response depends on how we measure its "true" value.

EPA's senior advisor on water, Ken Kopocis, warned the Goldman audience that this was no easy exercise: "Can you really give water a price? In a stream it's free, and when you don't have it…it's priceless."

Indeed, water is increasingly scarce and contested in many regions, including many parts of the United States. But according to traditional economic thinking, that scarcity should drive up the price of the good in question, and in turn moderate demand. But water is no ordinary good, and its price is the function of messy, local political processes. In the U.S. for example, it tends to be cheapest where it's least abundant, including in desert communities in Utah, Nevada and California.

In theory, "water markets" should help address this scarcity. As David Sunding, UC Berkeley water economist (and a reviewer of a Ceres study on water risk in the municipal bond market) noted at the Goldman event, there are "huge arbitrage opportunities" in water because different users pay vastly different amounts - i.e., farmers vs. residential users (a case in point is T. Boone Pickens selling in 2011 Ogallala aquifer water owned by Texas farmers for over $100 million to a group of municipalities that were fast running out of surface supplies).

But while water trading is seemingly viable, the "reality on the ground has proven to be quite different," Sunding says. Why is that? Too many local rules and restrictions that make water trading cumbersome. But just as important are massive engineering challenges of moving heavy water long distances.

No one knows that better than Patricia Mulroy, head of the Southern Nevada Water Authority and a keynote at the Goldman event, who spent nearly $2 billion to build a new intake pipe at water-starved Lake Mead and is seeking to spend billions more to pipe water 263 miles from eastern Nevada to Las Vegas.

As the person responsible for maintaining water security for the driest city in the country, Mulroy says the true value of water is about the cost of physically moving it. As she put it: "A human right to water? Sure. You come to me and I will tell you 'here's a bucket' - go to Lake Mead and take all you want. It's the hardware that isn't free."

In this world of growing scarcity, how do we balance the roles of pricing and governance for allocating a finite and essential resource?

At Ceres we are driving innovations in both of these arenas. We are working with the University of North Carolina Environmental Finance Center to identify the water utility rate structures that most effectively convey the scarcity of water while maintaining stable revenues and ensuring affordable access.

We're also working with large corporate water users like Coke, Suncor and Ford to help them identify opportunities to improve their water stewardship in their own operations and also play a more effective role in advocating for stronger governance of these limited resources in water-stressed regions.

The markets can be an effective tool for allocating scarce resources in most circumstances. However, markets without effective governance systems won't do the job of protecting the needs of the least able to pay and those of future generations.

Brooke Barton leads Ceres' water program, directing the organization's research and corporate and investor engagement on the risks and opportunities related to growing water scarcity. This  Article  first appeared in Ceres and is reprinted here with kind permission of the author.