Key takeaways
Water remains vastly underfunded across the global economy. The GCEW highlights how we can substantially raise the volume of finance for water, as well as improve the quality and direction of such finance.
Far greater investments are needed to conserve both blue and green water and scale up innovations for more efficient water use across agriculture, industry, mining, and other sectors that are critical for stabilising the global water cycle – underpinned by the new economics of water advocated in this report. We should explore how the value of green water can be recognised and incorporated in schemes for payment for ecosystem services. Considering water as natural capital points in the same direction.
Every stream of finance — public, private, domestic, and multilateral — must be significantly enhanced. To achieve this, we must build symbiotic partnerships that combine public, private, and other non-state actors, with appropriate sharing of risks and rewards amongst them.
Governments need to provide for certainty in policies and regulation, and reprioritise investments in water. Pricing is essential, as the under-pricing of water has systematically weakened the case for investment. There is also an important opportunity to reduce and redirect the massive direct and indirect financial subsidies that contribute to the overuse of water and environmental degradation. Harmful subsidies in agriculture alone are estimated to exceed USD 550 billion. Further, the discount rates used to assess investments in water infrastructure and ecosystem preservation should take into account their long term, including intergenerational, social, economic and environmental benefits.
National, regional, and multilateral development banks must be regeared to provide the catalytic finance needed to unlock vastly greater amounts of private finance — including patient, long-term finance. They should favour programmatic, portfolio-based approaches, aligned with public policy objectives.
Just Water Partnerships should be established and tasked with the design, implementation, and financing of transition towards development strategies aligned with the water agenda. These partnerships, involving development-finance institutions and national authorities, should build capacity to mobilise investments and manage blue and green water sustainably. They should make active and bold use of the menu of instruments available to catalyse private investments. These could include first-loss guarantees, concessional finance elements for lower-income countries, and co-investment arrangements to manage risks.
There is also untapped potential to diversify risks by bundling water projects across sectors and countries, to attract finance from institutional investors.
Disclosure of how corporate activity affects – and is vulnerable to – the hydrological cycle can redirect financial flows to support the water, nature, and climate agendas. Coordinated action with financial regulators is the way forward, building on on-going dynamics in climate and nature finance.
