Investors press corporations for water risk data as extreme weather bites

The investors are participating in CDP’s Non-Disclosure Campaign, which targets businesses in sectors with a high water footprint that are not yet disclosing comprehensive data on their water footprint, water stewardship and risk management.

The likes of Cathay Financial Holdings and Colombia Threadneedle Investments are among the investor supporters of the Campaign.

A record 1,029 businesses are being asked through the Campaign to enhance their disclosures. Focus sectors include retail, consumer electronics, data centres, aviation, manufacturing, automotive, and food and drink.

Among the firms asked for more information on their water strategy are Apple, Amazon, RyanAir and easyJet.

CDP has increased the number of companies asked to disclose more than twofold year-on-year. The enhanced pressure from investors comes as businesses face physical risks related to extreme weather events made more likely due to the climate crisis, and linked to water systems.

2023 was the hottest year on record in terms of the average global temperature. This exacerbated the likelihood of drought conditions in all regions. Meanwhile, some regions, like Western Europe, have experienced prolonged wet weather and deadly flash flooding.

CDP claims this, compounded with more of a public focus on water pollution, has focused investors’ minds on potential financial, social and reputational risks associated with water.

Previous CDP analysis has revealed the widespread under-reporting of water-related risks by large companies. The platform estimates at least $225bn is at risk from water-related issues in corporate operations and supply chains worldwide, but businesses are reporting just $77bn. At least 10% of this risk is deemed to be immediate.

Cathay Financial Holdings’ chief investment officer Sophia Cheng said the Campaign aims to “encourage investee companies to strengthen their water resource management and take proactive action to address pressing concerns” relating to the risks that water resource challenges pose to “food security, biodiversity, human health and economic stability”.

“The magnitude and complexity of the water crisis is vast, but guided by more complete data, directors are well-placed to meet the challenge ahead-on,” added CDP’s director of capital markets Claire Elsdon.

Beyond water

In previous iterations of CDP’s Non-Disclosure Campaign, corporates were more than twice as likely to disclose when engaged directly.

The Campaign has already spurred better water disclosures from automaker BMW, fashion brand Hugo Boss and data Boudier firm Equinix among others.

In addition to businesses engaged on water, the campaign also aims to improve data availability on climate and forests. 1,998 companies overall are being asked to disclose this year.

Targeted companies are being provided with a new, integrated questionnaire intended to streamline the disclosure process and support businesses to address their environmental impacts and risks more holistically.

Most companies using CDP disclose on climate. Water and forest disclosure uptake is less widespread. CDP additionally hosts a plastic disclosure platform which recently marked its first year.

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