New CDP analysis of corporate water risk finds companies anticipate US$397bn in future financial impacts, highlighting growing exposure across supply chains, manufacturing, digital infrastructure and global trade.
Companies are reporting growing financial exposure to water scarcity, drought, pollution and other water-related disruption, according to new analysis from global environmental disclosure organisation CDP.
The report, Water, Trade and Capital: How water is reshaping geopolitics, supply chains and financial risk, draws on water disclosures from more than 6,500 companies.
CDP said companies have already reported US$1.4bn in current financial impacts from water-related disruption and anticipate US$397bn in future impacts, ranging from disruption costs and regulatory risks to new capital expenditure requirements.
Corporate water risk reaches US$397bn in anticipated impacts
Only around a fifth of companies in the analysis reported quantified financial impacts from water-related issues.
Of the US$397bn in anticipated future impacts, CDP said US$45bn arises upstream in supply chains.
At the same time, more than a third of companies disclosing to CDP do not have a process in place to systematically assess and manage their water risks.
CDP’s Water Security programme encourages companies and capital markets to measure water dependencies, risks and opportunities as part of business planning.
The latest findings come as companies and governments reassess supply chains in response to geopolitical instability, trade tensions and concerns around industrial resilience.
Water dependencies extend deep into supply chains
CDP said reshoring, nearshoring and diversification strategies can create new vulnerabilities if water availability is not considered alongside labour, energy, logistics and other inputs.
Many water-related risks identified by companies occur deep within global supply chains, including in regions where water resources are already under pressure.
According to the analysis, around 60% of upstream water risks identified by companies headquartered in the Global North are located in the Global South.
This can leave businesses dependent on water governance and resource management well beyond their own operations and jurisdictions.
Earlier research involving CDP has similarly described water as a frequently overlooked input in global trade, with production and supply chains transferring water dependencies between countries and regions.
CDP links water resilience with investment decisions
Sherry Madera, CEO of CDP, 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.”
The findings suggest greater visibility of water dependencies could become increasingly important to investment and location decisions, particularly in water-intensive industries.
CDP said corporate disclosures contain more than 7,000 references connecting water with resilience, competitiveness, growth and financial performance.
Water demand from AI and manufacturing enters focus
Digital infrastructure is among the areas where corporate water risk is becoming increasingly relevant.
As investment in artificial intelligence drives further data centre development, operators face growing scrutiny over water use, particularly where cooling systems are located in water-stressed regions.
The issue also extends to advanced manufacturing and critical materials, where reliable water supplies can be essential to maintaining production.
Joe Ray, Head of Water at CDP, said: “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.”
Companies report water-related opportunities alongside risks
The analysis also identifies potential commercial opportunities associated with stronger water management.
Companies reported US$35bn in water-related opportunities already having a substantive financial or strategic effect, with a further US$925bn anticipated in future.
These opportunities can include investment in water efficiency, reuse, resilience and technologies that reduce dependence on constrained water resources.
However, CDP said only 54% of financial institutions assessed portfolio exposure to water-related risks and opportunities in 2025.
Its Financial Sector Water Knowledge Hub provides resources for banks, insurers, asset owners and asset managers assessing water-related financial exposure.
CDP argues that as governments compete for strategic industries and infrastructure, access to reliable water could play a growing role in determining where production, investment and economic growth are viable.
For more coverage of corporate water strategy and resilience, visit H2O Global News’ Latest News section.
Source: CDP
