Press Releases

Water Risk Poses a Potential Financial Impact of KRW 13.59 Trillion on Korean Companies

- A total of 205 business sites of Korean companies are exposed to water risk

- A significant gap exists between potential and actual water risk

- Korean companies urgently need to build water management and risk management systems

- CDP Korea Committee Report: CDP Korea Climate Change and Water Security Report 2022

Potential Financial Impact of Water Risk on Korean Companies Reaches KRW 13.59 Trillion

The potential financial impact of water risk on Korean companies totals KRW 13.59 trillion (approx. USD 10.4 billion), according to the 2022 CDP Korea Report published by the CDP Korea Committee (secretariat: Korea Sustainability Investing Forum, KoSIF). Among the 104 Korean companies that responded to the CDP Water Security disclosure request, a combined 205 business sites (131 overseas, 74 domestic) were identified as exposed to water risk, with a total potential financial impact of KRW 13.59 trillion as noted above. In addition, 50% of respondent companies (52 companies) reported exposure to water risks — such as rising costs and reputational damage — that threaten their financial stability and growth potential.

Figure 1: Korean Companies' Business Sites Exposed to Water Risk Worldwide

Source: CDP Korea Climate Change and Water Security Report 2022

Top Drivers of Water Risk in Korea: "Increased Water Stress" and "Drought"

The leading categories of water risk facing Korean companies were, in order: chronic physical risk, regulatory risk, reputation and markets risk, acute physical risk, and technology risk. Among the specific drivers, the top seven were: increased water stress, drought, regulation of discharge quality/volumes, increased water scarcity, more stringent regulations and preferences, and increasing difficulty in obtaining water withdrawal/operating permits. Notably, impacts stemming from a shortage of water supply — such as "increased water stress" and "drought" identified as having the greatest impact on business. Of all reported risks, 48% were expected to materialize within the next three years.

Chart 1: Key Drivers of Water Risk in Korea

Source: CDP Korea Climate Change and Water Security Report 2022

A Staggering 1,930% Gap Between Actual and Anticipated Water Risk

Analysis of CDP disclosure responses revealed that the actual scale and timing of water risk can far exceed what companies anticipate. In its 2022 CDP disclosure, POSCO reported a potential financial impact of approximately KRW 69.4 billion. However, according to POSCO's own earnings announcement, the company estimated that last year's flooding reduced its operating profit by KRW 1.34 trillion — a gap of as much as 1,930% between the company's actual water-related losses and its previously disclosed potential financial impact.

Chart 2: Actual vs. Potential Water Risk

Source: CDP Korea Climate Change and Water Security Report 2022

Urgent Need for Water Risk Management Among Korean Companies

The CDP Korea Committee's report points out that companies continue to underestimate the real scale of water risk. Yet water-related damage is already materializing — destroying natural ecosystems, causing loss of life and property damage, and even triggering operating losses and business crises for companies. Water risk is, in effect, both a corporate risk and a financial risk, underscoring the urgent need for Korean companies to strengthen their water risk management.

Karl Chun-Seung Yang, Executive Director of the CDP Korea Committee, commented: "The Korean expression '쓰다' (to spend/use) — as in 'spending money like water' — no longer applies. Today, water itself is becoming money. CDP is a global initiative that calls on companies to manage their water-related risks. By responding to CDP, companies can proactively address water risk, and effective water management can be the first step toward saving money."

CDP requests and discloses data each year from major companies worldwide on climate change, water, and forests on behalf of global investors. The data collected is used as an investment metric by global investors, and the CDP Korea Committee publishes an annual report each year based on the disclosure data of Korean companies.

CDP Korea Committee 『CDP Korea Climate Change and Water Security Report 2022』

CDP Korea Climate Change and Water Security Report 2022 

□ CDP Korea Committee

The CDP Korea Committee was established in 2008 to carry out CDP's work in Korea, with its secretariat run by the Korea Sustainability Investing Forum (KoSIF), a domestic responsible-investment organization. KoSIF is a nonprofit organization founded on April 3, 2007, with the mission of contributing to the building of a sustainable community by promoting socially responsible investment (SRI) that takes ESG factors into account. Its membership spans financial institutions, corporations, academia, civil society organizations, and individuals engaged in responsible investment.

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