The Water Crisis Demands a Global Response
Water is the lifeblood of our planet, sustaining human populations, the environment, and entire economies. Yet, we face a growing water crisis, with over 2 billion people lacking access to safe drinking water and 3.6 billion lacking access to proper sanitation. This crisis has severe implications for health, education, and quality of life, and it is only exacerbated by the undeniable link between water and climate change.
The top global risks over the next decade are all directly linked to water – from the failure to mitigate and adapt to climate change to natural disasters, biodiversity loss, and ecosystem collapse. Addressing a challenge of this magnitude requires an unprecedented global response, one that combines action, innovation, and substantial investment.
Mobilizing Public and Private Capital for Water Security
To meet the water-related infrastructure needs of the future, the World Bank Group estimates that $6.7 trillion will be required by 2030, with this figure expected to rise to $22.6 trillion by 2050. Reaching this level of investment will require governments to establish enabling conditions and reforms to facilitate greater flows of public and private finance into the water sector.
International financial institutions and multilateral development banks must provide country-level support for solutions that enable private capital, blended finance, and credit enhancements to cover public sector risk. “Governments must identify areas where private capital can help and develop a pipeline of bankable projects to attract this capital,” as the World Bank Group Vice President for the Planet notes.
Compared to other infrastructure sectors, private sector participation in water has remained negligible, with about 85% of annual spending still coming from the public sector. However, the private sector is vital as an off-taker, financier, investor, and operator, and can help bridge significant investment gaps to meet the Sustainable Development Goal 6 targets on clean water and sanitation for all by 2030.
Innovative Financing Models for the Water Sector
To attract more investment, it is essential to have more – and different – ways of financing the water sector that are tailored to a country’s needs, context, and risks. The World Bank Group’s support and products can be used to ensure contractually balanced and financially sustainable projects.
For example, in India, the government collaborated with the World Bank Group on a public-private partnership to support wastewater treatment and reduce pollution in the Ganga river. Under this model, the government paid 40% of project costs to private developers on completion of construction, with the remaining 60% paid to private operators in annuities over 15 years, in addition to performance-based operation and maintenance payments.
Other countries have also shown impactful private sector participation using innovative financing solutions. In Brazil, the implementation of a national framework requiring municipalities to carry out public tenders has allowed private operators to compete for concession contracts, mobilizing $15 billion in private sector investments over the last three years. In Uganda, the National Water and Sewerage Corporation has become more efficient and financially sustainable by tapping local financiers to reduce non-revenue water, expand water services, and cut energy costs.
Aligning Water Investments with Climate Outcomes
As climate change manifests primarily through water, the water sector offers the best prospects for both adaptation and mitigation investments. The World Bank Group is working with partners to identify the most realistic opportunities to mobilize investments in water security that are aligned with priority climate outcomes.
One such example is the AS Samra Wastewater Treatment Project in Jordan, one of the most water-scarce countries on the planet. An innovative blended financing package – consisting of grants, government funding, equity investments, commercial debt from the private sector, and MIGA non-commercial risk guarantees – supported an increase in Jordan’s wastewater treatment capacity while introducing renewable energy solutions. Today, the plant treats about 70% of the country’s wastewater, meeting the needs of 3.5 million people, and generates about 84% of the power required for its operations.
Partnerships and Collaborations: The Key to Scaling Solutions
Partnerships and collaborations are emerging as essential tools in derisking the journey towards sustainable water solutions and ensuring progress across the value chain. These partnerships can take various forms, such as buy-sell agreements for intermediates (like pyrolysis oil), new ventures to sort feedstock (such as plastics recovery facilities), and upstream investment by waste management companies.
Similarly, in the water sector, the World Bank Group is working across the public and private sectors to tackle the issues posed by climate change on water through its new Global Challenge Program, ‘Fast Track Water Security and Climate Adaptation.’ This program recognizes the critical role of both the public and private sectors in supporting the urgent transformation needed to combat the global water crisis.
“Great things are possible when we partner with speed, scale, and urgency,” says the World Bank Group Vice President. “We are committed to bringing together development partners, governments, and financial institutions to fundamentally shift how the global water sector is financed, and ultimately how water is valued and managed to help build a livable planet for all.”
By fostering partnerships, mobilizing public and private capital, and aligning investments with climate outcomes, we can take meaningful steps towards addressing the global water crisis and building a more sustainable and resilient future for all. As an IT Fix reader, you can be part of this movement by advocating for and supporting innovative water solutions in your community and beyond.
