The latest analysis from CDP shows $397bn of anticipated future impacts from water challenges such as droughts disrupting critical trade routes.

Companies already report $1.4bn in current financial impacts from water-related disruption and anticipate $397bn in future impacts, ranging from expected disruption costs and regulatory risks to new capex requirements. These anticipated impacts include $45bn arising upstream in supply chains. Yet despite this exposure, more than a third of companies disclosing to CDP still do not have a process in place to systematically assess and manage their water risks.

The report, Water, Trade and Capital: How water is reshaping geopolitics, supply chains and financial risk, points to a critical blind spot as governments and businesses pursue reshoring and nearshoring trade practices, as part of a resurgence in industrial policy intended to hedge against geopolitical volatility. Efforts to reduce dependence on overseas supply can create new vulnerabilities where water availability is limited.

Many of the water-related risks disclosed by companies occur deep within global supply chains, often in water-stressed regions where water governance is fragmented or under-resourced. Company disclosures via CDP reveal the extent of this exposure: for companies headquartered in the Global North, around 60 per cent of their upstream water risks are located in the Global South. As a result, businesses are often heavily dependent on the effective management of water resources beyond their immediate control and, in many cases, beyond the jurisdictions in which they operate.

Sherry Madera, CEO of CDP said, "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.”
Awareness of water issues is also increasing in the capital markets but remains nascent, with only 54 per cent of financial institutions assessing portfolio exposure to water-related risks and opportunities in 2025.

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