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Private finance urged to fund bankable global water projects

London : Stating that solving the world’s water-related challenges will need a proactive approach, innovative structures that enable greater cooperation between different players and the use of blended finance mechanisms, a new report has urged corporates, investors, governments and NGOs to step up their efforts to jointly drive sustainable and bankable freshwater projects.

Urgent efforts by all stakeholders are required to deliver improved water security, create financial value and enhance the health of the world’s river basins, the report from WWF, ING Bank and the Boston Consulting Group (BCG) said, while underlining the fact that the only way to achieve the required level of investment in the water sector was by significantly leveraging the private sector.

According to the Organization for Economic Co-operation and Development (OECD), S$1 trillion needs to be invested each year in water infrastructure - wastewater treatment, water plants, and supply networks - alone to secure water for all. Further investment is needed in other types of assets.

Some of these projects and other essential investments are not bankable propositions and will depend on the backing of the public sector, including projects in emerging markets where local populations cannot afford to pay for their water or where initiatives are designed to meet basic human needs.

For companies and private sector investors, this presents an opportunity to improve sustainable water resource management and mitigate water risk while also generating solid financial returns.

In the report 'Seizing the water opportunity' which was released recently at the FT-WWF Water Summit in London, WWF, ING Bank and the Boston Consulting Group have detailed how private and public capital can join forces to boost global efforts to achieve the Sustainable Development Goal of water for all, securing a critical lifeline for societies, economies and the bottom lines of firms and financiers according

“Without substantial investment in sustainable freshwater projects, the world’s water crisis will only get worse – increasing water shortages, degrading precious ecosystems, and putting businesses at risk of drying and drowning assets,” said Aaron Vermeulen, WWF Global Lead Finance and Freshwater.

“The only way to secure sufficient investment is by leveraging the power of the private sector. But individual bankable projects must be part of a broader river basin approach, which also includes improvements to freshwater governance and blended finance mechanisms.”

Freshwater bodies globally are under growing pressure from dam development, climate change and soaring demand for water to irrigate farms and fuel hydropower plants. In Europe, only 40 per cent of European surface waters are currently considered healthy (EEA, 2018), despite the EU Water Framework Directive’s legal obligation to protect and restore Europe’s freshwater bodies. This strong law must be used to foster investments in protection and restoration, and the private sector can play an important role in achieving the political objectives.

"The EU water law forces EU Member States to achieve good status for all rivers and wetlands by 2027. That unlocks investments for freshwater restoration in many parts of Europe. A strong and stable legal framework creates long-term investor certainty and is the basis for sustainable freshwater management in Europe," said WWF European Policy Office's Head of Natural Resources Andreas Baumüller.

The opportunities for sustainable bankable projects range across all sectors from improving agricultural water usage to enhancing industrial wastewater treatment, developing solar power plants and restoring wetlands. The report highlights some existing bankable projects including:

Farmers close to the Great Barrier Reef adopting sustainable practices, which curbed reef-damaging river pollution and generated significant financial benefits;

Textile manufacturers in Turkey’s Buyuk Menderes basin implementing cleaner production methods, which reduced their costs and cut pollution; and

UK utility Anglian Water raised £250 million in a green bond jointly arranged by ING with proceeds being used to tackle ecosystem-related issues, including resilience and drought.

Underlining the growing risks to their supply chains, the report calls on multinational companies to take the lead in promoting better use of water resources by identifying bankable freshwater projects within their own operations and supply chains. Proactively supporting investments in bankable projects can help companies gain a competitive advantage and benefit from lower costs, more resilient supply chains, and a better reputation with customers and regulators.

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