Corporate disclosures of water-related climate change risks in financial filings have increased since 2009, a Ceres report found. The report specifically found that disclosures of water risks increased between 2009 and 2011. The biggest change occurred in the percentage of companies disclosing water-related physical risks, which increased from 76 percent to 87 percent. In 2009, only eight of the 82 companies surveyed (10 percent) disclosed that climate change posed water related risks. In 2011, there were 22 companies (27 percent).
The report compared the water risk disclosure of the 82 companies analyzed as part of a 2010 Ceres report, and looks at disclosure since the SEC issued guidance in 2010 on how companies should provide climate change risk information to investors. The report covers water use in eight water intensive sectors: beverage, chemicals, electric power, food, homebuilding, mining, oil and gas and semiconductors.
Drought in Texas and flooding in Thailand illustrate water risks
Recent events of the last few years illustrate the importance of disclosing water-related risks, as the report points out. Texas, the leading beef producer and third largest producer of all agricultural products in the U.S., suffered from a drought last year which caused $7.62 in damages to crops and livestock. As a result, nationwide price increases occurred. The state’s cotton producers suffered $2.2 billion in losses which caused a shortage of cotton supplies for apparel companies. By the end of last year, 98 percent of the state still faced drought conditions.
Another example cited by the report occurred in Asia. Flooding in Thailand in the fall of 2011 disrupted the country’s manufacturing sector, causing 27.7 percent fewer hard drives to be shipped. Honda expected the flooding to decrease sales in Thailand by 30 percent. In December, Prime Minister Yingluck Shinawatra estimated flood-related damages at $42 billion.