Latest analysis from CDP, the global non-profit that runs the world’s only independent environmental disclosure system, shows companies spread across the globe are anticipating an almost $400 billion hit in future impacts from water challenges such as droughts disrupting critical trade routes.

According to new CDP analysis of disclosures on water from over 6500 companies Water, Trade and Capital: How water is reshaping geopolitics, supply chains and financial risk: only a fifth of companies reported quantified financial impacts.

Companies already report US$1.4 billion in current financial impacts from water-related disruption and anticipate US$397 billion in future impacts, ranging from expected disruption costs and regulatory risks to new capex requirements.

The anticipated impacts include $45 billion 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.

As geopolitical instability, trade tensions and supply chain disruption reshape the global economy, governments and businesses are rethinking where strategic industries are located and how critical goods are sourced. But as they reshore, nearshore and diversify supply chains, they risk overlooking a resource that cannot be moved: water.

The findings point 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% 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.

Water increasingly a strategic business issue with direct implications for growth and competitiveness

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.”

Joe Ray, Head of Water, CDP added:

" 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."

The opportunity is also becoming increasingly important to digital infrastructure. As investment in AI drives demand for datacentres, operators able to reduce dependence on water-intensive cooling could gain an advantage in regions facing increasing water stress. CDP analysis finds companies are increasingly recognising these connections in explicitly economic terms, with over 7,000 references in corporate disclosures linking water with resilience, competitiveness, growth and financial performance. Companies also report $35 billion in water-related opportunities already having a substantive financial or strategic effect, with a further $925 billion anticipated in future.

Awareness of water issues is also increasing in the capital markets but remains nascent, with only 54% of financial institutions assessing portfolio exposure to water-related risks and opportunities in 2025.

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.

CDP says companies with improved visibility of water dependencies will be better placed to attract capital, maintain production and grow in water-stressed markets.

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