Boost for Green Investment in Water Infrastructure and Sustainable Ecosystem, Cities, Agriculture & Energy
New Criteria covers built infrastructure and nature based systems
Learn more: Webinar on Thursday, June 14 at 11:00 EDT/ 16:00 BST/ 17:00 CEST - Register here.
What’s it all about?
The Water Consortium, a global group of climate finance and sustainability organisations, has formally launched the new Water Infrastructure Criteria of the Climate Bonds Standard, marking a major turning point in best practice for sustainable investment in water based infrastructure and green/grey hybrid systems.
Developed in two phases, the first phase of the Criteria covered both traditional “built” or grey engineered water infrastructure for water treatment, flood defence, drought defence, storm water management, and ecological restoration and management.
The final development phase extends the Criteria’s reach to cover nature-based and hybrid water infrastructure, such as wetlands and watersheds that may be used for purposes of water collection, storage, treatment and distribution, flood protection and drought resilience.
This means that for the first time, nature’s water infrastructure such as watersheds, wetlands, and forests, which are essential for the provision of clean water around the world, can be protected, managed and restored, using Climate Bonds Certified green bonds – making them ripe for the investments they direly need.
Mitigation, adaptation and resilience components
Developed for potential green bond issuers and investors, the new Water Infrastructure Criteria defines and evaluates low carbon and climate resilient water infrastructure projects encompassing two broad components: 1) climate mitigation and 2) climate adaptation and resilience.
The Criteria screens what types of water assets and projects should be included in green bond investment in water projects to qualify for Climate Bonds Certification. Certified projects must contribute to reductions in greenhouse gases over the lifetime of the asset, and must prove sufficient adaptation to changing climatic conditions.
The Criteria now fully recognise that ecosystems (including rivers, lakes, natural watersheds, aquifers and groundwater) are the original water infrastructure and are essential to meet local, national, and global resilience goals. Nature-based solutions are increasingly being integrated within formal water management systems as green and hybrid infrastructure.
First Water Criteria Certified green bonds
The first Climate Certified Water Bond was issued in May 2016 by the San Francisco Public Utilities Commission (SFPUC) and the second bond by the City of Cape Town in September of 2017. Approximately USD1.6 billion of water bonds have been awarded Climate Bonds Certification already.
Who's saying what? (Issuer voices)
Patricia De Lille, Executive Mayor of the City of Cape Town:
“Being located in a water scarce region and in dealing with the harsh impacts of climate change with our worst drought in over 100 years, the City of Cape Town is acutely aware of the need to facilitate investment in water infrastructure. The development of these Water Criteria within the Climate Bonds Standard has enabled us to direct the proceeds of our bond towards critical projects within this space."
"We welcome the expansion of the Criteria and hope it will stimulate much needed global investment in adaptive and resilient water systems."
Harlan L. Kelly Jr, General Manager, San Francisco Public Utilities Commission (SFPUC):
“Now more than ever, cities must make critical investments in their water and wastewater infrastructure to ensure a reliable system for future generations. Expanding the Criteria for Climate Bonds Certification, especially around the effective watershed management, will help make that happen.”
“As one of the first public utilities to take advantage of green infrastructure financing, the SFPUC knows first-hand the importance of innovative financing techniques to overcome the environmental challenges we’re facing around the world. We are committed to continuing to upgrade and secure San Francisco’s infrastructure so it will serve our residents well into the future.”
Green bonds, a bridge to SDGs
Increased green bond based water investment also aligns directly with some of the targets and indicators of Sustainable Development Goal (SDG) 6 - Water and Sanitation. The same broad alignment exists, though not as directly, with aspects of SDG 15 - Life on Land.
More green bond finance for water infrastructure, grey/green hybrid systems and nature based systems will help achieve these SDGs and the 2030 agenda. It’s as simple as that.
How Much Water Investment is needed
Projections for global financing needs for water infrastructure vary from USD6.7 trillion by 2030 to USD22.6 trillion by 2050 according to the latest OECD figures, including USD1.7 trillion to meet SDG 6 - Clean Water and Sanitation. SDG 6 also sets out specific targets and indicators to 2030.
Earlier annual projections can also be found on p14 of “Water Fit to Finance” from the World Water Council (WWC) and the OECD. A May 2016 report by the World Bank suggests that water scarcity, exacerbated by climate change, could cost some regions up to 6% of their GDP, spur migration, and spark conflict.
According to the latest assessment by the World Bank, 4.5 billion people lack safely managed sanitation services and 2.1 billion people lack access to safely managed drinking water services. Water-related hazards, including floods, storms, and droughts, are responsible for 9 out of 10 natural disasters. Climate change is expected to increase this risk, in addition to placing greater stress on water supplies.
Who’s saying what? (Expert voices)
Amy Hauter, Associate Portfolio Manager & ESG Research Analyst, Brown Advisory:
“Before we invest in a green bond, we need to know that it’s a solid investment, and we need to know it will produce impact. The new Water Criteria will definitely help us do our job better—under these Criteria issuers can communicate clearly about their use of proceeds and as investors, we can better quantify the impact of those activities. We’ll be able to better assess climate and sustainability factors in water infrastructure projects and the increased transparency will, we hope, encourage more investment in climate resilience.”
John Matthews, Water Infrastructure Criteria TWG Lead Specialist & Director of AGWA:
“For years, we have needed a way to communicate not just the need for resilience but what resilience looks and smells like — what it looks like on the ground. And we’ve needed to show how natural capital — lakes, rivers, snowpack, and groundwater — are as much a part of our water management systems as concrete and reinforced steel. Investors need to know that resilience is something that can be reported in a credible, realistic, and transparent manner. That’s what we are delivering today.”
Monika Freyman, Director, Investor Engagement - Water, Ceres:
“The need for widespread investment in new water infrastructure is integral to strengthening climate adaptation, building resilience and the development of sustainable cities. The broad reach of the new Criteria now gives issuers and investors an opportunity to assess the underlying impact of all water-based investment against a science-based standard. It provides a sound platform for increased green bond based investment in water and water assets.”
Cate Lamb, Director, Water Security, CDP:
“Water security, compounded by a changing climate, may well be the defining environmental issue of the 21st century. The challenges posed are significant, the potential impact is huge, but the opportunities of early action are also great.”
“While the solutions may be complex, this new Water Infrastructure Criteria has just made it easier for investors and companies to ensure they are pursuing science-based water secure, climate resilient investments.”
Todd Gartner, Director, Food, Forests & Water Program, World Resources Institute:
“The launch of the CBI green bonds Water Infrastructure Criteria will provide the added validation for development banks and other financial institutions to confidently invest in natural and hybrid water management systems, with clear recognition of the anticipated water, climate and financial benefits and returns.”
Sean Kidney, CEO, Climate Bonds Initiative:
“Scaling up grey and green water infrastructure investment are vital resilience and adaption responses to the climate changes already baked in to future global patterns. There is widespread recognition that water issues are core to social and urban development, industry, agriculture and security policy. Sustainable Development Goal (SDG) 6 relates directly to clean water and sanitation.”
“The new Water Infrastructure Criteria puts before the bond market a rigorous science-based assessment process for water projects. Its uptake by green bond issuers and investors will help the acceleration of climate investment needed by end 2020 and achieving water outcomes integral to urgent climate action and the 2030 sustainability agenda.”
The Last Word – A big thank you to the TWG and Consortium!
The Water Infrastructure Criteria was developed in two stages starting way back in 2015 by a Technical Working Group (TWG) led by Dr John Mathews of AGWA.
The process has been supported by the Water Consortium, which is comprised of the Climate Bonds Initiative, Ceres, World Resources Institute, CDP and the Alliance for Global Water Adaptation (AGWA) which is supported by the Stockholm International Water Institute (SIWI).
We’d like to publicly thank all the TWG members and the Consortium and acknowledge their support.
Want to know more? Register for our Webinar!
A Deeper Blue for Green Bonds: Water Investment Criteria for Nature-based Solutions
Thursday, June 14 11: 00 EDT/ 16:00 BST 17:00 CEST
‘Till next time,
Climate Bonds+
