Healthy cities and companies depend on healthy river basins. As the effects of climate change and intensifying water use make themselves felt, so the role of ecosystems in managing water risk is making its way up the investment agenda.
The good news is that companies are not only increasingly aware of water risk, they are also starting to act. In 2017, companies reporting to CDP committed US$23.4 billion across more than 1,000 projects to tackle water risks.
City and regional governments are also directing investment in water management projects. Our data shows that last year 80 cities reported US$9.5 billion in projects.
But the investment figures alone only tell half the story. Traditional ‘grey’ forms of water infrastructure – like plants for sewage treatment or desalination – are also carbon intensive. As the world moves towards a low-carbon economy, companies and cities are increasingly aware that water security must go together with climate change mitigation.
They are starting to see that nature itself can often provide the best solutions to managing water risk, while helping to reduce the carbon intensity of their operations.
Wetlands, for example, play an important role in purifying water, while forest cover can protect against flooding and act as a source of fresh, clean water. Both bring other benefits too, from improving quality of life to boosting biodiversity.
Over the past few years, we have seen companies, governments and development organizations begin to incorporate these ‘nature-based solutions’ into their water management projects.
This shift – from grey to green infrastructure – is already making an impact. A report by Forest Trends calculated that governments, water utilities, companies and communities spent nearly US$25 billion in payments for green infrastructure for water in 2015, growing at 12% a year since 2013.
Barriers to adoption
But the shift to nature-based solutions in water management isn’t all plain sailing. There are still major hurdles for companies and governments looking to invest in green infrastructure.
Problems accessing capital mean these new solutions can go unfunded. The services they provide are often difficult to express in financial terms, leaving investors unsure of their value. And while ‘green bonds’ are becoming an increasingly mainstream way to finance environmental projects, investors are still wary of projects that lack a standardized set of criteria.
That is why CDP has joined the Water Consortium, a global group of sustainability organizations, to launch Water Infrastructure Criteria as part of the Climate Bonds Standard.
The Criteria gives investors certainty that their capital is contributing towards genuinely sustainable water management projects. It indicates which can qualify for certification by the Climate Bonds Initiative.
These projects can be ‘green’, or ‘green-grey ’ hybrid systems that incorporate some degree of nature-based infrastructure.
The way forward
The launch of these new criteria is an exciting first step towards integrating nature-based solutions into water management. But there is still a lot of work ahead.
We are only now refining methods to value in economic terms the benefits of green infrastructure, like wetlands, watersheds and forests. It’s part of a shift towards thinking about ecosystem services as playing an essential and valuable role in managing water risk.
The Water Infrastructure Criteria should encourage nature-based solutions to water management by reliably quantifying the benefits they provide.
This has enormous potential to boost water security across the world. And they can contribute to driving down greenhouse gas emissions by encouraging investment in projects with a lower carbon footprint.
Certified green bonds for projects managing, protecting and restoring ecosystems to increase water security promise to unlock more capital for cities, states and regions, too, specifically for nature-based solutions.
When used in conjunction with a service like CDP’s Matchmaker, which provides investors with information on climate-resilient infrastructure projects seeking investment, these new Criteria can be a powerful force to mainstream the adoption of green infrastructure.