CDP urges resilience investment as firms predict $400bn hit from water impacts

(by Karma Loveday)

Water-related disruption has caused companies $1.4bn of financial impact, and they anticipate a further hit of almost $400bn from climate disruption costs, regulatory risks and new capex requirements.

That is the message from Water, trade and capital: how water is reshaping geopolitics, supply chains and financial risk – analysis of disclosures on water from 6,500 companies from environmental disclosure specialist CDP.

$45bn of the $400bn is expected to occur upstream in supply chains. CDP noted that for companies headquartered in the global north, around 60% of their upstream water risks are located in the global south. These firms are exposed to water management risk beyond their control and jurisdictions.

CPD argued the findings expose “a critical blind spot” as governments and businesses pursue re-shoring and near-shoring trade practices, as part of a resurgence in industrial policy intended to hedge against geopolitical volatility.

Chief executive Sharry Madera said: "Across sectors ranging from AI and advanced manufacturing to critical materials, water is increasingly a strategic business issue with direct implications for growth and competitiveness. As companies make decisions about investment, sourcing and expansion, there is a fundamental constraint that cannot be solved simply by moving a factory. You can relocate production; but you cannot relocate a river basin.

“Water, therefore, should not be treated simply as an environmental issue, but as essential economic input. Companies and countries that understand their dependencies and invest in resilience will increasingly have an advantage in attracting capital, maintaining production and growing in a more resource-constrained world.”

Under-reporting and under-recognition of water-related risk may mean the picture is even more stark. Only one in five companies reported quantified financial impacts from water, and more than a third of those disclosing to CDP did not have a process in place to systematically assess and manage water risk. Moreover, only 54% of financial institutions assessed portfolio exposure to water-related risks and opportunities in 2025.

Joe Ray, head of water at CDP, commented: “Water risk is deeply material to many sectors but is not yet fully priced into capital markets. That means water resilience will increasingly become a competitive differentiator for firms in water-dependent industries. Companies that act to mitigate their exposure and can signal this to the markets will be better positioned as water stress intensifies.”

CDP concluded: “As governments compete for the industries and infrastructure that will shape the next phase of the global economy, access to reliable water will increasingly influence where investment, production and growth are possible.”