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Mark Hillsdon reports on how the growing need to protect a shared resource that is under critical threat is leading to innovative new partnerships
Sustainable management of the world’s water has become one of the most pressing global issues. Historically, the management of water has been poor and blighted by under-investment, which has left nearly half the world’s population living with only limited daily access to freshwater.
Issues such as climate change, population growth and rapid urbanisation mean that the pressure on already overstretched water resources is only going to increase, with the Organisation for Economic Co-operation and Development (OECD) estimating that at least $1 trillion needs to be spent globally on water management projects every year.
Speaking at the recent FT Water Summit in London, Heineken CEO Jean-François van Boxmeer warned: “Water is the resource that can lead much more quickly to violent conflict in the world than anything else ... [yet] for some reason, society as a whole has not always sensed the urgency around water.”
Corporates have woken up to the need of taking water seriously, perhaps more than governments
That is starting to change as droughts, floods and declining freshwater become the new norm. Many companies recognise that they need to move away from traditional forms of water management and embrace new approaches to water stewardship.
CDP, which helps organisations measure their environmental impacts, reports that more than 2,000 businesses are now disclosing their water footprint, with almost a quarter saying that water efficiency is leading to new opportunities and benefits. (See ‘We can’t wait for Al Gore. CEOs have to lean in to the water crisis’)
Sophie Trémolet, senior water advisor Europe for The Nature Conservancy (TNC), has also seen water security edging closer to the top of the business agenda. “Corporates have woken up to the need of taking water seriously, perhaps more than governments,” she says.
“Because of the ‘broken-dam’ nature of water management ... unless there’s a drought or a national level risk there’s no ability for local governments to co-ordinate their actions,” she continues. This puts businesses, which have a much longer-term, global vision about their water risk, in pole position to take action, she believes.
“We have moved forward, particularly in terms of how companies are viewing water risks," agrees Dr David Tickner, chief freshwater adviser at WWF-UK, “[But] the reality [is that] demand for water keeps going up, pollution of water keeps getting worse, and biodiversity and lakes and wetlands ... continue to decline in too many locations. There’s still an awful lot more to do in most parts of the world, and the risks are very real.”
Ambika Jindal, vice-president of sustainable finance at ING bank, says part of the problem has been the failure to attract enough private investors by offering them water projects that are large enough to provide high returns.
The first step is for water solution providers and the private sector to work together to build a pipeline of projects
“The challenge for water projects seems to be that they are not yet designed to be appealing for private sector finance,” she explains. “The first step is for water solution providers and the private sector to work together to build a pipeline of projects that have such a lifetime plan in place.”
This is one of the ideas set out in Seizing the Water Opportunity, a joint report by ING, WWF and global management consultants, the Boston Consulting Group.
The idea is to encourage investors with the offer of a programme of projects that produce multiple benefits for multiple different stakeholders, including a profit for investors.
Biodiversity in lakes and wetlands continues to decline. (Credit: Sundry Photography/Shutterstock)
The concept involves identifying, framing and then realising bankable projects, a relatively new concept for the conservation community, says Tickner.
“What we mean is bigger projects, more financially demanding projects,” he explains. “We also know that financial investors, particularly from private financial institutions, are just not interested in small investments, they’re interested in investments of tens of millions of dollars, if not larger.
“We've latched on to this partly because of the scale of the challenge in some areas. It’s the kind of challenge where a little bit of philanthropic funding here and there [is] no longer enough.”
Closed-loop recycling is very much at the heart of a lot of this stuff
One example is the WWF’s work around leather in Kanpur, India, where pollutants flow untreated into the river Ganges, affecting human health. “We’ve pulled together the international players who buy leather from those sources, plus the tanners locally ... into a platform to try and identify solutions,” he says.
As well as attracting investment, it’s also about showing local companies that water management can save money, particularly around retrieving some of the chemicals they use in the tanning process rather than pumping them out as effluent. “Closed-loop recycling is very much at the heart of a lot of this stuff,” explains Tickner.
New funding ideas are also helping to change the look of water management. Blended finance involves the public sector, philanthropic donors and impact investors funding less favourable schemes, with higher risk but lower returns, while commercial investors start funding more mainstream projects, with higher potential returns.
In America, Forest Resilience Bond is a public-private partnership that enables private capital to finance much-needed forest restoration, particularly in California, where recent events have shown the need to address the risk of forest fires, and the effect they can have on water courses.
In the UK, Anglian Water has issued the first public utility green bond, worth £250m, which will finance a range of activities supporting the company’s sustainability strategy, and efforts to secure long-term water supplies across the East of England, one of the driest areas of the UK. These include new water abstraction technologies, drought and flood resilience schemes, and progressive water recycling.
Taking a more global perspective, TNC’s water funds aim to bring together multiple players and give potential investors greater confidence to finance ecosystem services.
Water funds encourage nature-based solutions that support conservation and the restoration of natural areas
Typically, explains Tremolet, the fund is designed to give downstream users, such as water utility companies, businesses and individual citizens, a structure and the authority to invest in upstream catchment management. These groups are often the worst affected by impacts such as pollution and silting, which reduces the flow of the river.
How the funds are financed depends on location, continues Trémolet, and can range from major private and public sector investment, to utility companies adding a tariff to bills, and even a local “water tax”.
The funds also offer an important alternative to downstream investment in facilities such as water treatment plants, which may lead to cleaner water but fail to tackle the root cause of poor water quality. Instead, water funds encourage nature-based solutions that support conservation and the restoration of natural areas, while creating better access to clean water for people, commerce and nature.
Watersheds will never work by just giving a billion dollars and hiring an engineering company
Part of this work with TNC is to develop new water funds in Colombia, El Salvador, Argentina and Mexico. These will unite various stakeholders around the common goal of contributing to water security through sustainable watershed management, while also improving agriculture, creating jobs and contributing to climate resilience.
AB InBev is also working with WWF to develop blended finance approaches at scale, helping to improve water access and quality, while enhancing the health of river basins, and ensuring the needs of local communities at projects in Africa and Latin America.
In George, South Africa, the Outeniqua project covers water issues at one of the continent’s few commercial hop-growing regions. The site is of huge importance to AB InBev, but is also an area of substantial water stress. Working with WWF, the company discovered that invasive alien plants were consuming as much as 50% more water than indigenous flora. As a result of clearing the plants from over 1,000 hectares, WWF estimate that over 1.5 million cubic metres (m3) of water is now being returned to the local ecosystem each year.
Instead of each of us launching our own water projects … it is possible for us to collaborate
In nearby Zambia, a WWF report published in June looked at the need for innovative financial solutions to improve the health of the lower Kafue river system. The area is an important source of water for the capital Lusaka, and plans are now in place to bring together numerous stakeholders to address the impact of industry on the region. Possible investments range from habitat restoration to new infrastructure to treat greywater. The project will drive a win-win for communities, businesses and nature, adds Fourie.
Another key player is the International Water Stewardship Programme (IWaSP), which is implemented by the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) and jointly funded by the British and German governments.
In Kenya, a partnership with multiple UK retailers including Marks and Spencer, Tesco and Asda, along with flower growers and local authorities and communities, is improving water conservation around Lake Naivasha. This is a major flower-growing area, and together the partnership has led to better water abstraction control, protection of the shore from erosion and increased reforestation, helping both the flower growers and communities, who now have better access to water.
But water is not just a rural issue. “Many cities in the world ... can't account for more than 30% of their water,” says Fourie, “so we know that sometimes it’s more effective to invest in fixing those leakages than to start new projects.” In Cape Town, where AB InBev has a major brewery, the city has been on the verge of running out of water several times over the past few years. By helping to reduce pressure in certain parts of the system, the company is helping to save millions of cubic metres of water a year.
Collaboration between drinks companies also needs to be explored, says Fourie, and is something that’s often discussed at the Beverage Industry Environmental Roundtable, an important talking shop for the sector’s global leaders.
”We are increasingly talking about how we can collaborate in areas where we have common water concerns,” he says. “Instead of each of us launching our own water projects … it is possible for us to collaborate, to partner and scale up.”
Mark Hillsdon is a Manchester-based freelance writer who writes on business and sustainability for Ethical Corporation, The Guardian, and a range of nature-based titles including CountryFile and BBC Wildlife.
This article is part of the in-depth Water Risk briefing. See also: