CDP Publishes First Financial Sector Water Disclosure Findings

CDP has released results from its inaugural financial sector water disclosure questionnaire, drawing responses from 275 of 1,226 invited financial institutions. Respondents collectively represent a combined market capitalisation of US$3.7 trillion, establishing a baseline for measuring how the sector values water risk.

Of the 275 financial institutions that disclosed on water, only 93 conducted water-related risk assessments on their portfolios, and just 48 reported exposure to water risks. Twenty-two institutions estimated a maximum potential financial impact of US$6.4 billion from water risks. Despite low risk-awareness scores, 118 respondents indicated board-level oversight of water issues, and 72 have set water-related requirements that clients or investees must meet. Primary barriers cited for inaction include a lack of tools and methodologies and competing priorities centred on climate.

The findings highlight a structural gap in how financial institutions account for water as a material risk. Studies by the Cambridge Institute for Sustainability Leadership (CISL) show that water stress can push the credit ratings of some East Asian heavy industry companies from investment grade to speculative grade. The Network for Greening the Financial System, comprising 108 central banks, has flagged nature-related risks — including water — as potentially having significant macroeconomic implications. Assets already stranded or at risk in the energy and mining sectors due to water risks total US$15 billion.

CDP calls on financial institutions to map portfolio water impacts, set measurable water-related targets, and publicly disclose progress. Policymakers are urged to implement comprehensive water disclosure requirements. The global financing needs to achieve SDG 6 on clean water are estimated at US$1 trillion. CDP, supported by the Dutch Valuing Water Initiative and partners including Water Footprint Network and Mercer, designed the disclosure mechanism to baseline and accelerate action. TNFD guidelines, once finalised, are expected to further embed water risk assessment into financial sector practice.

Key figure — US$203 billion in potential value from water opportunities identified by 23 financial institutions