CDP Global Water Report 2022 “Riding the Wave” – Key Takeaways
By Erica de Souza 24 May, 2023
CDP’s new report reveals billions in potential gains for Southeast Asian companies that disclose water risks. Souza, CDP’s Regional Manager for Water Security, shares more key findings
Southeast Asian companies stand to gain billions by addressing water risks
By the 1970s, decades of indiscriminate pollution by cargo boats, squatter settlements, street hawkers and livestock farms that haphazardly settled along the riverbanks left the Singapore River resembling an open sewer devoid of aquatic life. After an extensive clean-up intervention by the citizens of Singapore, the river is now part of the country’s newest and largest freshwater reservoir, contributing significantly to its domestic water supply. The drums of dragon boats echo across the bay as diners clink glasses at the many alfresco bars and restaurants along its banks. Cheeky, smooth-coated otters, which were once locally extinct, now thrive in the waters and have become symbolic of Singapore’s environmental renewal.
The Singapore River is emblematic of the abundance of opportunities present in addressing water risks…
…yet, Southeast Asian companies contributed only 123/3,909 corporate water disclosure in 2022
The story of the Singapore River is emblematic of the abundance of opportunities present in addressing water risks. At CDP, we believe that disclosure drives insight and leads to positive action that corporates, financial institutions and governments can take towards building a water-secure future.
Globally, more companies than ever are disclosing on water, an encouraging sign of the growing recognition of the existential nature of water issues. 2022 was another record-breaking year for CDP, with 3,909 companies providing data on water security, an 85% increase over the last five years. However, Southeast Asian companies contributed only 123 of those disclosures. And so, despite a steady year-on-year increase in responses from the region, the relatively modest tally presents a murky view of the extent of its corporate action on water risks.
Key findings from CDP’s new report
Analysis of CDP’s 2022 data, detailed in our Global Water Report, “Riding the Wave”, demonstrates that businesses are acting on water risks and have the potential to unlock billions of dollars in financial rewards as a result. 1,729 companies reported a suite of opportunities that could reap a combined US$436 billion, with an average of over US$250 million per company.
1,729 companies reported a suite of opportunities that could reap a combined US$436bn, with an average of over US$250mn per company…
…Financial benefits could reach ≈US$1trn if all 3,909 respondents had identified similar opportunities
While opportunities relating to water efficiency are the most frequently reported, opportunities connected to the development of new products and services produced the greatest financial rewards, with the reported figure close to US$300 billion. These figures are likely a significant underestimate given that over half of the respondents were yet to identify opportunities or were unable to attribute financial figures to them.
Companies realize 4x more opportunities when integrating water into long-term business & financial planning
Using the average reported value, the financial benefits could reach around US$1 trillion if all 3,909 respondents had identified similar opportunities. The analysis also shows companies realize four times more opportunities when they integrate water into long-term business and financial planning.
The report is replete with examples spanning all regions and sectors, from L’Oréal to Samsung, which should serve as inspiration for businesses yet to act. These stories of opportunity are particularly relevant to Southeast Asia, a region of immense economic potential. It has a combined GDP of USD$3.9 trillion and would be the world’s sixth largest economy if it were a country. According to the IMF, the region has the second highest projected growth rate in the world at 4.6%, far surpassing the global average of 2.8%. Despite the promising economic outlook, climate change is an ever-accelerating threat that could wash away this progress. Southeast Asia is particularly vulnerable to water-related risks, with IPCC projections indicating that it faces the highest risk of coastal flooding globally, and will also experience more heavy precipitation, runoff, and high flows.
FIs play a crucial role in driving corporate action to direct capital towards water security
Perhaps Southeast Asia’s financial powerhouses have yet to fully grasp the economic impact of the water crisis, as evidenced by the equally humble number of water disclosures from financial institutions (FIs) in the region. In 2022, CDP invited FIs, including asset managers, asset owners, banks, and insurers, to disclose on water in CDP’s annual global questionnaire for the very first time. Of 1,226 invited to disclosed, 275 responded, with only eight of those coming from Southeast Asia. CDP’s analysis shows that of 93 FIs assessing their portfolio’s exposure to water-related risks and opportunities, only two were from the region.
93 FIs assessing their portfolio’s exposure to water-related risks and opportunities, only two were from the region
FIs play a crucial role in driving corporate action through their influential power to direct capital towards water security. Gathering corporate water data through disclosure mechanisms is imperative for them to lead this transformation. The data can be used to engage with their clients, develop ambitious targets, build governance structures, and create unique systemic incentives for progressive water solutions. For instance, Sumitomo Mitsui Financial Group offers corporate loans to finance water-related services, infrastructure and adaptation measures, accounting for 9% of its portfolio value at US$68 billion. CDP’s disclosure data also includes key environmental and financial metrics on targets, governance, strategy, and scenario analyses required for comprehensive stress-tests that incorporate the effects of both acute and chronic risks.
FIs also have the power and influence to call upon governments and financial regulators for stronger regulation and many are already doing so. 35 investors with over US$3 trillion in assets co-signed CDP’s open letter to governments calling for more robust policy action to tackle the water crisis. Investors are asking for more ambitious regulatory frameworks that require mandatory disclosure on water-related risks, impacts, and opportunities. This will increase transparency and allow for data-informed decisions that will accelerate the pace and scale of innovation and investments in water solutions. CDP’s policy analysis shows the EU and UK are the only two G20 members to have proposed comprehensive water disclosure regimes.
35 investors with over US$3 trillion in assets co-signed CDP’s open letter to governments calling for more robust policy action to tackle the water crisis
Though wide-reaching, regionally standardized, and globally aligned policies on financing water management are lacking in Southeast Asia, there has been growing momentum for mandatory disclosure. At the UN 2023 Water Conference in March, we witnessed global impetus for mandatory corporate disclosure on key water metrics.
While waiting for regulation to catch up, the private sector & civil society actors should continue building on the opportunities
This message was underlined at the conference by Singapore’s very own Senior Minister Tharman Shanmugaratnam, in his position as a chair for the Global Commission on the Economics of Water (GCEW). While we wait for regulation to catch up, the private sector, together with civil society actors like CDP, should continue building on the opportunities leveraged through action on water risks, as affirmed by the GCEW’s inaugural report.
CDP calls on Southeast Asia’s businesses, FIs and governments to ride the rivers of change and respond to the urgency of the water crisis, beginning with disclosure.
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