Resources

KoSIF Issue Brief  - Current Status and Tasks of Water Risk and Disclosure for Korean Companies

The water risks inherent in Korea’s core industries have transcended simple environmental issues and are now manifesting as substantial financial threats. Concurrently, a multi-layered disclosure landscape is emerging, combining institutional mandates such as the EU ESRS E3 with increasing information demands from capital markets and global customers (e.g., TNFD, IFRS). This 'KoSIF Issue Brief' presents integrated response strategies and insights to enhance corporate reporting efficiency.

This issue brief diagnoses, through objective data, that water risk exacerbated by climate change has been elevated to a core "financial risk" directly linked to a company's financing and production stability, moving beyond mere environmental metrics. Furthermore, it examines the current status of multi-layered global regulations (ESRS E3, TNFD, IFRS) and the mandatory information requirements of global clients, while analyzing the gap in competitiveness arising from the domestic industry's continued reliance on voluntary disclosures.

Through this brief, corporate executives and disclosure practitioners can clearly grasp the latest pressure from global regulations and capital markets surrounding water disclosure. Notably, rather than responding individually to the fragmented requirements of multiple disclosure frameworks, this brief identifies an efficient integrated response strategy: leveraging 'CDP Water Security' as a single tool to simultaneously satisfy core requirements. Additionally, it highlights strategic opportunities to reduce actual financing costs by linking water disclosure data with Sustainability-Linked Loans (SLLs).

[Table of Contents]

1. Expansion of Water Information Disclosure Demands by Global Stakeholders
• - Water disclosure requests from major global corporations
• - Water disclosure requests from global financial institutions and investors
2. Current Status of Water Risks
3. Financial Impact of Water Risks
4. Regulatory Trends in Water Disclosure
• - Global: Expansion of mandatory water disclosure through ESRS E3, TNFD, and IFRS
• - Korea: Centered on voluntary disclosure
5. Implications: Response Directions for Domestic Companies
• - CDP Water Security
• - Comprehensive Summary
• References
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[Key Findings]

• - Structural Water Risk Vulnerability and Risks of Domestic Companies: According to 2025 CDP response data, 49% of domestic companies extract water from water-stressed regions, and 77% have identified significant physical water risks such as floods and droughts. Korea’s core industries, including pharmaceuticals (88.5%), industrial goods (61.2%), and IT (60.4%), show high water intensity with over 50% of water extraction occurring in water-stressed regions.
• - Insufficient Identification and Quantification of Financial Impacts of Water Risks: Despite such high-risk industrial structures, domestic CDP Water Security respondents estimate the average financial impact per water risk incident at approximately 33 million KRW. This is significantly lower than the 11.4 billion KRW calculated for climate change risks, indicating a low level of awareness regarding water risks and suggesting that the field is still in its nascent stage compared to climate change.
• - Global Mandates vs. Domestic Voluntary Disclosure: While the global market is expanding mandatory water disclosure even to non-EU companies through the EU CSRD (ESRS E3), TNFD, and IFRS S2, Korea remains at a stage of voluntary disclosure, lacking integrated and mandatory water disclosure norms for private enterprises.
• - Securing Efficiency Through Integrated Response Tools: To mitigate the immense administrative and cost burdens caused by regulatory fragmentation, participation in 'CDP Water Security' is proposed as the most realistic and cost-effective disclosure response strategy. It enables companies to fulfill 50–80% of the core requirements of various frameworks, including ESRS E3, GRI 303, and TNFD, through a single questionnaire.

[Read the Issue Brief (Korean)]

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