Water and finance

The technology needed to address water issues is available, but its application is hindered by challenges that includes not only insufficient governance and management solutions but also a lack of finance. The traditional finance mechanisms - tariffs, taxes, grants and other transfers - are not sufficient to meet the challenge. While governments need to prioritize water investments more, water progress also requires attracting additional financial resources from the private sector.

Water challenges also pose a risk to the financial system, as they could undermine the value of existing investments, including factories, infrastructure, agriculture and more. The resilience of such investments needs to be strengthened to avoid losses. Water challenges need to be  sufficiently addressed to avoid the reversal of development achievements. 

Though private financiers are willing to allocate funds for water and other projects that make an impact,  they need a clear understanding of the risks and well- developed financing structures to do so. Blended finance, whereby public and private financing is combined, sounds promising but is often difficult to implement. 

To ensure that the challenges related to water and finance – both the need for water investments and the need for managing water-related risks to existing assets and value chains – are  addressed, IHE Delft is developing a Centre of Practice on Water and Finance.

IHE Delft’s Centre of Practice on Water and Finance will work to develop and disseminate an understanding of public financing and private financing, and to facilitate the combination of different types of financing.  It will develop capacity by sharing experiences, research and insights on financing mechanisms, thereby catalysing effective collaboration for sustainable outcomes.

Financing water investments requires using a systems perspective that considers stakeholder groups’ changing expectations and demands, tasks and responsibilities as well as opportunities and constraints.  It requires the consideration of local contexts, including the governance and regulatory structures, as well as stakeholders.

• water and sanitation users
• governments at all levels from local to national level
• public water sector organizations
• private sector investors
• banks, both international and local
• insurance companies, rating agencies and other institutions

To collaborate effectively, stakeholders need to develop knowledge and skills so that they can understand each other, not only in terms of language and terminology, but also in terms of  motivation: Why do stakeholders choose to act? Or why do they choose not to act? This understanding underpins stakeholders’ capacity to create and sustain progress.

IHE Delft works to promote the financing of water includes research, education and other activities related to water governance, inclusive land- and water use, nature-based solutions and other fields.

Financing Investment in Water Security: Recent Developments and Perspectives (2022)

Financing water investment for global sustainable development: Challenges, innovation, and governance strategies (2022)

Blended finance in practice : The Kenya Innovative Finance Facility for Water (KIFFWA) and the evolution of ‘bankability’ in the water sector (2022)

Mainstreaming nature-based solutions through insurance: The five “hats” of the insurance sector (2021)

Financing for Water  - Water for Financing: A Global Review of Policy and Practice (2019)

The global water agenda is facing an inflection point, and changes are needed, not only to increase access to water in the many areas that still go without, but also to ensure that the water supply in areas with services is protected, said IHE Delft alumnus Pablo Bereciartua, who was appointed Chair of the Global Water Partnership (GWP) in July 2022. Read the interview.