CDP operates an independent environmental disclosure system used by more than 24,800 companies and approximately 1,000 cities, states, and regions. Earlier this month, the nonprofit released a new report titled “The Disclosure Dividend 2025.” The organization says that companies that measure and manage their environmental risks will have an advantage in unlocking the disclosure dividend. It defines the disclosure dividend as “the return companies receive from disclosing and acting on their environmental risks, impacts, and opportunities.” CDP explains how: “It goes much further than risk management, by positioning companies for growth. The disclosure dividend pays out year after year, enabling better decision-making and attracting investment. It also prepares companies for a rapidly changing regulatory landscape and helps identify new revenue streams.”
CDP notes that climate risk is escalating, with the financial cost of a lack of action estimated to hit $38 trillion per year by mid-century. For example, American insurance premiums have already doubled since 2017 due to natural disasters. However, planned mitigation expenditures can ultimately save money.
In this latest report, CDP analyzed 2024’s corporate disclosures and found that the median financial risk per company sat at $39.4 million, which only took $3.1 million to mitigate, or less than ten percent. This trend held steady across various company sizes. Large corporations faced $6.5 trillion in risks, which only took $1.4 trillion to mitigate, while small and medium enterprises faced $8.5 billion in risks, which only took $1.4 billion to mitigate.
The trend was also visible across environmental themes. The estimated $6.1 trillion impact of climate risk could be mitigated by $1.4 trillion in expenditures; the estimated $43.9 billion impact of forest risk could be mitigated by $3.7 billion in expenditures; and the estimated $339 billion impact of water risk could be mitigated by $58.7 billion in expenditures. “Acting on these risks makes good business sense. The financial impact in the short-term runs into the trillions, while the costs to addressing them are dramatically lower,” CDP wrote.
67% of corporations and small and medium-sized enterprises using CDP’s disclosure process reported that they had found environmental risks with substantive financial effects. 28% selected policy risk as most significant, followed by 19% who selected acute physical risks like drought, flooding, or wildfires, and 14% who selected chronic physical risks like changes in land use or rising sea levels.
According to the report, every industry saw a potential return from addressing climate risks, including apparel, biotechnology, healthcare, and pharmaceuticals, food, beverage, and agriculture, fossil fuels, hospitality, infrastructure, manufacturing, materials, power generation, retail, services, and transportation services. Apparel and retail had the highest median potential returns at a factor of twenty-one.
Photo Courtesy Red Cross Red Crescent Climate Centre
According to CDP’s findings, companies also see average returns of up to $8 for every $1 spent, but could see returns of up to $21 on mitigating physical climate risks. The median financial opportunity per company sat at $33.1 million from taking such action, in exchange for a cost of only $4.6 million. The total $10.7 trillion impact of environmental opportunities, “equal to the current value of all the world’s gold,” would only cost $4.2 trillion to realize.
Most companies currently see these opportunities as a result of addressing climate change; the $10.5 trillion in climate opportunity could be realized with $4.1 trillion in spending. Meanwhile, the $1.3 trillion in forest opportunity could be realized with $22.7 billion in spending, and the $1.4 trillion in water opportunity could be realized with $86.7 billion in spending.
64% of companies using CDP’s disclosure process identified financial opportunities. 12% said that they had unlocked those opportunities in 2024, which were worth $4.4 trillion, or more than Japan’s annual gross domestic product (GDP). “The quantified opportunities yet to be realised represent another $13.2 trillion in potential upside,” CDP added.
Photo Courtesy CIF
The organization found that more than 90% of big corporations that use their disclosure process have already established processes for identifying and assessing their environmental risks and opportunities, or intend to do so in the next two years.
There is more that companies can be doing, CDP pointed out. For example, offering financial incentives to suppliers makes them 52% more likely to reduce their emissions, but only 11% of companies are using such incentives to clean up their supply chains. Meanwhile, although 43% of large corporations already have a climate transition plan, only 15% of small and medium enterprises have one, and only half of those are aligned with a 1.5°C world.
These processes and plans are essential for the future. “The economics behind disclosure are becoming clear – data driven decisions help to manage business risk and unlock opportunity,” said Sherry Madera, CEO of CDP. “Disclosure is the foundation of action. Our data shows that companies that measure and manage their environmental impacts not only future-proof their operations but also unlock tangible financial and strategic gains. The disclosure dividend is real – and the business case for seizing it has never been stronger.” As CDP concluded, “Disclosure is no longer just a transparency exercise – it’s becoming an economic imperative.”
