Press Releases

Water Risk Revealed by the Yongin Semiconductor Cluster…
Impacts Extend to Semiconductors, Batteries, and Steel 

- KoSIF Issue Brief Published: 77% of Domestic CDP Respondents Identify "Substantive Water Risks" 

- Quantification of Financial Impacts Remains Insufficient: 33 Million KRW per Incident vs. 11.4 Billion KRW for Climate Change Risk 

- Global Clients and Investors Expand Demands for 'Water Data'… Concerns Over Delayed Corporate Response in Korea 

 
The process of establishing the 900 trillion KRW Yongin Semiconductor Cluster has highlighted issues regarding industrial water demand and the securing of intake sources, bringing 'water' to the fore as a key variable determining industrial location and production stability. In fact, the Yongin Semiconductor General Industrial Complex experienced construction delays due to conflicts with local governments over permits, licensing, and regional coexistence during the installation of water pipelines from the Yeoju Weir on the Namhan River. This demonstrates that water risk is a management risk affecting procurement costs and supply chain competitiveness, transcending simple environmental management dimensions.  

The Korea Sustainability Investing Forum (KoSIF) released an issue brief on the 13th (Wednesday) titled "Current Status and Tasks of Water Risk and Disclosure for Korean Companies," based on an analysis of CDP data. KoSIF stated that water risk is not limited to specific industries, analyzing that as droughts, floods, and water stress intensify, it could impact production stability, cost structures, and supply chain assessments across industries highly dependent on water, including batteries, steel, chemicals, and pharmaceuticals. Accordingly, the organization emphasized the necessity for domestic companies to establish systems for measuring, managing, and disclosing water risks.  

CDP is a global platform that collects and discloses corporate environmental data, covering ESG-related information such as climate change, forests, water, and plastics. The Korea Sustainability Investing Forum serves as the CDP Korea Committee, annually publishing reports based on CDP data, and plans to continue issuing materials on various environmental issues, including carbon emissions, resource use, and biodiversity protection, beyond the current assessment of water risk management levels among domestic companies.

| Korea's Highly Water-Stressed Structure… 77% of Domestic CDP Respondents Identify Substantive Water Risks 

The United Nations University Institute for Water, Environment and Health (UNU-INWEH) recently warned in its "Global Water Bankruptcy" report that the world is approaching an irreversible threshold of water crisis. Consequently, a trend is spreading to recognize water risk as a structural risk affecting overall corporate operations.  

According to 2025 CDP Water Security data, 77% of domestic respondent companies identified substantive water risks. Key physical risks included floods (51 cases), water stress (48 cases), and droughts (39 cases). While domestic companies show a higher degree of water risk exposure compared to the global average, the level of financial quantification remains insufficient. According to the 2025 CDP Korea Report, the average financial impact per reported water risk incident was approximately 33 million KRW, showing a significant gap compared to the approximately 11.4 billion KRW average financial impact per climate change risk incident. This suggests that the financial quantification of water risk is still in its nascent stage compared to climate change risk, and that actual risks may be under-identified or under-assessed.  

Geographically, Korea is a water-stressed nation, harboring structural vulnerabilities in the location of water-intensive industries. Water stress refers to the ratio of actual water withdrawal to renewable water resources within a specific basin; under international standards such as WRI, a ratio of 40% or higher is evaluated as a 'High Stress' area. According to the issue brief, as of June, when water demand and precipitation volatility peak in summer, most of the country falls into the 'High' grade or above according to WRI Aqueduct standards.  

Differences in water stress exposure were also identified by industry. As of 2025, among domestic CDP respondents, the water extraction ratio in water-stressed regions was highest in the pharmaceutical/health industry (88.5%), followed by industrial goods (61.2%), IT (60.4%), and consumer discretionary (50.8%). In particular, semiconductors, batteries, and steel—which constitute Korea’s core export portfolio—are evaluated as industries with very high or vulnerable water impacts based on the CDP Water Impact Index. 

| Global Clients, Investors, and Financial Institutions Expand Demands for Water Data 

As water risk is pointed out as a macroeconomic factor capable of threatening 7–9% of global GDP, the water information demanded by global clients, investors, and financial institutions is becoming increasingly concrete. Global companies such as Microsoft and Apple are requesting information from suppliers regarding water usage, wastewater management status, efforts to reduce water consumption, and water reuse.  

Against this backdrop, investors and financial institutions have begun to recognize water risk as a risk linked to financial market stability, extending beyond mere environmental concerns. Major central banks, including the European Central Bank and the Bank of England, are also including water risks such as floods and droughts in climate stress tests, implying that demands for corporate water information disclosure will further expand.  

In the real financial market, the utilization of water data is in full swing. In the global financial sector, there is a case where BBVA linked CDP Water Security scores and water usage reduction as Key Performance Indicators (KPIs) to the Sustainability-Linked Loan (SLL) provided to the Spanish energy company Iberdrola. Domestically, IBK (Industrial Bank of Korea) operates a loan product for SMEs worth a total of 189.5 billion KRW targeting 363 manufacturing and service companies, including water usage reduction as an optional KPI.  

As the demand for water disclosure grows, the number of global companies responding to CDP Water Security is rapidly increasing. Global respondents grew from 1,426 in 2016 to 9,922 in 2025, an approximately seven-fold increase. While the number of Korean respondent companies has also steadily increased, it has actually decreased over the last three years, with 135 in 2023, 116 in 2024, and 113 in 2025.  

The Korea Sustainability Investing Forum also compared the water disclosure levels of major companies by industry based on 2025 CDP response status. Among top companies by market capitalization, major non-responding domestic companies were identified as Hanmi Semiconductor in IT/semiconductors; LG Energy Solution, Hyundai Mobis, and HL Mando in consumer discretionary; and POSCO Future M, Hyundai Steel, and OCI Holdings in raw materials/materials.  

Conversely, within the same industrial sectors, companies such as Samsung Electronics, SK Hynix, Samsung Electro-Mechanics, Hyundai Motor, Kia, LG Electronics, POSCO Holdings, LG Chem, and Lotte Chemical are responding to disclosures, revealing a gap between companies. Considering that Japan, which has a similar manufacturing and export-oriented industrial structure, is expanding its participation in CDP Water Security disclosure and holds a high proportion of companies in the global leadership grade, the delay in response by Korean companies may act as a risk in global comparative evaluations.  

| Water Information Being Integrated into Global Disclosure Systems… Korean Exporters Also Need Preparation 

The importance of water-related information is also growing in global sustainability disclosure standards. Companies are expected to explain not only water-related policies and targets but also actual water consumption, water use in water-scarce areas, water reuse/recycling volumes, and the impact of water risks on financial performance.  

The EU's sustainability disclosure standards (CSRD/ESRS E3) already include information related to water and marine resources as key disclosure items. Although the scope of application and reporting timelines for EU regulations have been partially adjusted, the overall trend of demanding water data from companies remains. The issue brief analyzed that while Korean companies need to check their applicability and reporting timelines, they also need to proactively refine water-related data.  

The weight of water information is also increasing in discussions on nature-related disclosures (TNFD/ISSB). International discussions on sustainability disclosure standards are proceeding in a direction that guides companies on how to identify and explain nature and water-related risks within existing disclosure frameworks. This signifies that the momentum for investors and clients to more concretely confirm a company's water risk management level is strengthening.  

Nahyun Nam, a senior researcher at the Korea Sustainability Investing Forum, stated, "Water risk is no longer a matter of whether a company chooses to manage it voluntarily; it has become core management information required by global clients, investors, and financial institutions." She added, "Especially in a situation where various disclosure frameworks operate simultaneously, companies must systematically refine water data and establish a response system that can explain it in accordance with global standards".  

She further emphasized, "Integrated disclosure channels like CDP Water Security can be a realistic means for companies to respond to the information demands of clients and investors while reducing reporting burdens," and "As water disclosure data is already being used as a KPI for financial products such as Sustainability-Linked Loans (SLLs), proactive water disclosure should be viewed not as a cost, but as a strategy for reducing financing costs and securing global competitiveness". (End)  

 [Read the Issue Brief]

Inquiries: Nahyun Nam Senior Researcher (nhn5505@kosif.org)