Last month’s inaugural meeting of the Roundtable on Financing Water gathered around 70 international participants at OECD HQ in Paris convening banks, development finance institutions, bilateral donor agencies, government agencies, NGOs and research institutions.The Roundtable has been established by the Organization for Economic Co-operation and Development (OECD), the World Water Council (WWC) and the government of the Netherlands to facilitate dialog between water and finance communities on the global challenges of financing investments needed for water security and economic growth in the context of the Sustainable Development Goals.
Xavier Leflaive, Water Team Leader at the OECD’s Environmental Directorate, told OOSKAnews he was “thrilled by the discussions at the inaugural meeting of the Roundtable on Financing Water. Obviously, the Roundtable fills a gap and provides opportunities for fruitful discussions and concrete ways forward on how to channel the appropriate level of finance to water-related investments”.
A summary of this first Roundtable’s discussions was released last week, identifying key messages:
- Water is often an under-valued and under-priced resource, creating investment opportunities when it can be allocated to higher value uses.
- Policy interventions can improve the risk-return profile of water security investments and increase the scope for shifting water resources to higher value uses.
- Innovation in technologies (e.g. membranes, energy recovery, digitization, etc.) and in business models (e.g. converting benefits into revenue streams) can make water more attractive for investors and need to be scaled up.
- “Blended finance” is a promising way to leverage contributions from different sources of finance with different risk appetites to make projects more bankable. “Blended finance” is defined by the OECD as “the strategic use of public or private funds, including concessional tools, to mobilize additional capital flows (public and/or private) to emerging and frontier markets and represents one approach that has the potential to attract new sources of funding to the biggest global challenges”.
- While project finance seeks direct revenue flows from investments for a certain level of risk, other types of financiers, particularly institutional investors, seek investments that satisfy fiduciary requirements while allowing them to invest capital at scale.
- Investments in water security can maximize net benefits when portfolios of projects at the level of river basins are considered as part of a long term, strategic investment pathway.
Looking to the future, OECD’s Leflaive said “Avenues for future work are ambitious, but with that level of commitment, we will manage! We now embark in robust analytical work to stimulate further discussions at the next meeting in Tel Aviv in September”.
Future Roundtable areas of activity will include analysis of policies and conditions that promote or hinder water security investment; mapping financing flows for investments in water security; seizing opportunities generated by innovation; the economics of “blended financing” for water security investments; the role of information in stimulating demand for investment in water security and designing investment pathways that maximize water security over the long term.
The discussion about financing water will continue at August’s Stockholm World Water Week, where the Roundtable organizers have convened a dedicated session on financing, while the second official Financing Roundtable will be held at September’s Water Technology and Environmental Control Event (WATEC) in Tel Aviv. A further anticipated milestone is the World Water Forum in Brasilia in March 2018.