Correlation to Causation: Equipping C-Suite with Insights for Tomorrow’s Economy
Sherry Madera, CEO of CDP, explores how environmental data is becoming an essential economic signal, and why demonstrating clear links between environmental change and financial outcomes is critical for business leaders.
Why speaking the language of CFOs is critical to building a resilient economy
Global shocks often lead to great innovations. They force a re-evaluation of the status quo and the emergence of new pathways.
Economics is no different.
We are experiencing a global shift in regulation, supply chains, trade, and technology which are disrupting how we operate, buy products, access capital and do business.
This shift will fundamentally change how we value and account for risk and opportunity. At a more fundamental level, it invites us to challenge the way we predict, project, and plan. Economic principles are not all changing – but perhaps we can agree that we need to apply some tenets to how we measure and monitor economies differently.
What is not changing is the need that CFOs, CEOs, economists, and investors have for comprehensive economic data to make informed decisions. What data is essential to plug into economic rules is, however, rapidly evolving. And it needs to evolve even faster to safeguard businesses and industries from miscalculation and value erosion.
Environmental data is a fundamental and critical economic input. Not because we want to protect the common good of the planet we live on. No. Because it resets the economic inputs businesses, financiers, and economists use every day.
In other words, environmental data is economic data. Proving this causation – showing that environmental change directly drives financial outcomes, not just correlates with them – is what we are working on.
The road to causation: water as an economic input
Let's take water as an example. Water is a fundamental economic input facing increasing global pressure.
Analysis by Goldman Sachs Asset Management states that 19% of the total revenue of companies in the MSCI ACWI IMI index have a high dependency on water.
Yet on average 36%[1] of companies still do not systematically assess water risk, despite growing awareness of its materiality.
Water has been seen as an infinite resource. This summer’s droughts in Europe showed us how fragile this outlook has become. Rivers have been at an all-time low; the Danube, the Rhine, the Po and the Loire changed life and economies in eastern Europe, Germany, Italy and France.
The direct economic effect is measurable. The Rhine could only carry 15% of its cargo due to low water levels resulting in supply chain disruption. The Danube created energy infrastructure losses with insufficient water for cooling in energy facilities triggering direct estimated losses of $632M[2]. Lack of water in the Po created crop damage across Italy.
The language of causation
It is time to make these economic impacts less anecdotal and more actionable. The Earth-Positive Economics Advisory Board, convened by CDP, is working to demonstrate the causal links between environmental impact and financial materiality – and accelerating the integration of this data into economic planning.
To achieve this goal, the group identified a simple but significant barrier that must be overcome first: language.
Sustainability professionals speak on 'nature', 'ecosystem services' and 'environmental dependencies'. Economists use different language: 'factors of production', 'productive assets' and 'input constraints'. The same meaning; completely different terminology.
It is important to speak the same language to engage with decision-makers shaping the future economy.
This is perfectly achievable. The terminology of the Chief Sustainability Officer can quite easily be translated into that of the Chief Financial Officer – both are driving business resilience and competitive advantage. And as the world warms and becomes thirstier for water, these two offices overlap more than ever.
View images below from our Earth-Positive Economics Advisory Board event at New York Climate Week 2026.
Economic renovation: where to start?
The idea that economic theories and inputs need revisiting is not new. There has been a great deal of work in this area for decades – some of which is highlighted on the Earth-Positive Economics Advisory Board webpage. There is no time or point in remaking the wheel.
However, it is a good time to ask why the shift to the use of environmental economic inputs in financial projections, valuations, and purchasing decisions has not become definitive?
One suggestion is that it is all very complex and a lot of factors are at play, making a “cause and effect” argument difficult. This is true. And I believe we can do better than find excuses not to change.
There are two areas specifically highlighted by the Earth-Positive Economics Advisory Board so far. These begin to break down elements to test how economic theories are shifting in a shifting world.
Firstly, water emerged as the strongest initial test case – water is one of the clearest areas where environmental conditions can directly influence operational performance, costs, supply chains, insurance, and financial outcomes. Water transcends agriculture and is an economic input in many fundamental sectors of our economies.
Secondly, insurance may be the clearest causation transmission mechanism – insurance is a powerful example of where environmental risks are being translated into economic signals through premiums, coverage decisions, underwriting and insurability.
Beyond causation: turning input into output
Demonstrating causation is not the end goal. However, it’s an important step in demonstrating that data on environmental inputs and impacts is essential to making sound financial decisions. As scarcity, risk, and supply chain shocks continue to disrupt global trade and outputs, this will only become more apparent.
Latest analysis by Intercontinental Exchange Group demonstrates that companies that disclose through CDP are 35% less exposed to transition risk costs than peers that don’t disclose. By 2050, this equates to US$1 trillion in enterprise value.
The data is explicit.
The next major opportunity lies in deeper integration of this data into global economic planning. Those that embrace this will be better prepared for the realities of the future economy – and best placed to turn this global shift into opportunity.
After a busy Climate Week NYC last week, it is clear to me that the shift to focusing on business resilience, energy security, and creating sustainable value has happened. Now is the time to give the CEO, CFO, and economic community the proof that correlation with environmental factors has evolved to causation.
That’s what CDP is working on. We welcome partners to help us leverage our 25 years of data. Let's move faster. The earth can’t wait.
Keep track of our Earth-Positive Economics Advisory Board program of work
Footnotes
1. CDP Water Disclosure Data 2025
2. Hungary to shut down sole nuclear plant as Danube falls to record low, PM says | Reuters