How to finance for water
Even now, right in the middle of the Covid-19-crisis, there’s money.
To be frank: there is a lot of it. And much of it is not in the hands of (international) governments or non-profit organisations, but in the investment funds of highly commercial businesses, banks and even private equity funds.
Just as 80 millionaires around the world recently called for higher taxes to help COVID-19 global recovery, investors all over the world are looking to invest in a sustainable future.
As water is the earth's and all its inhabitants' lifeline, it will drive the future.
“What was once considered a company mission to do social good is now a business imperative,” the World Economic Forum said in January 2020.
Combine that with the knowledge the world’s 100 most sustainable corporations deliver better for investors, and it’s easy to see why major business leaders are focusing their attention more and more towards combining their commercial interests with making a positive impact on the world.
Mismatch between water projects and financers
As coordinator of the Dutch SDG 6 alliance and in my role as CEO of Netherlands Water Partnership, I see successes of these efforts daily.
It is, for instance very visible in the fact that many financers only support projects that meet environmental, social and corporate governance (ESG) criteria, as do parties such as TCFD, GRI and SASB.
"After all: water driven business is plain good business."
However, still too often we find there is a mismatch between the projects which financers are looking for and water-related projects in search of funding.
And that is a shame, as an estimated US$7,500 billion is needed between now and 2030 to build the resilient water infrastructure required to reach SDG 6.
Eye on the money
The water sector, therefore, needs to turn the attention more to the financial feasibility of its projects. Many project developers struggle to translate the societal benefits of water into clear business cases. We need to ask the uncomfortable yet crucial questions:
- What are the needs and necessity of the project? Who is benefiting from it?
- Who is willing to pay for it?
- Is the price reasonable considering the risks?
Water projects are currently disproportionally financed with public money. We need to seek the resources aside from the ‘usual suspects’, such as the calls of the World Bank or the NGO funds.
How? One option is to use a matchmaker such as Netherlands Water Partnership. We connect the authoritative and innovative Dutch water sector to projects and financiers around the world.
Reasons to be optimistic
Furthermore, financiers need to be involved in the development of new propositions at a very early stage, so that water projects can meet the criteria of the financial sector. Two great examples of this are the Water Finance Facility and the Kenya Innovative Finance Facility for Water (KIFFWA).
Finally, educate yourself into what those criteria are. At NWP we offer a four-day course “Financing Water Investments”, specifically for water professionals.
These are hard times, with societies everywhere struggling to adapt to climate change. However, there’s plenty of reason to be optimistic.
The definition of 'good' business has changed dramatically. Let's help the business leaders of today and the future match their search for creating an impact on the great water projects out there.
After all: water driven business is plain good business.
Bianca Nijhof
Managing Director
Netherlands Water Partnership (NWP)
