Climate Bonds updates Water Infrastructure Criteria to strengthen climate resilience

The effects of climate change are most clearly seen and strongly experienced in water systems. From intensifying droughts to more frequent floods, climate impacts are increasingly transmitted through water infrastructure, ecosystems and supply networks. Yet investment has not kept pace. 
 
According to UN-Water, over 2 billion people lack access to safely managed drinking water, and water-related hazards account for a significant share of global disasters. Despite this, blue and water-labelled bonds remain a small segment of the sustainable debt market, highlighting a persistent gap between climate risk and capital allocation. 
 
Water sits at the intersection of climate adaptation, economic stability, and public health. As climate risks intensify, infrastructure must be able not only to function today, but to perform under future and uncertain conditions. 
 

Introducing the updated Water Infrastructure Criteria 

In response, the Climate Bonds Initiative has released an updated Water Infrastructure Criteria under the Climate Bonds Standard, following one month of public consultation and the incorporation of stakeholder feedback. 

The Criteria provides a framework to identify and certify investments across the water value chain, including water supply, wastewater treatment, flood protection, drought resilience, and nature-based solutions. 
 

What has changed 

The update moves beyond eligibility, focusing on how water investments can demonstrably contribute to climate resilience in practice. It does so by: 

• Embedding the Climate Bonds Resilience Taxonomy (CBRT) within the water sector, clarifying what constitutes a meaningful contribution to resilience  
   
• Requiring climate vulnerability assessments and adaptation plans for all assets, ensuring risks are identified and managed adequately  
   
• Introducing a more robust Adaptation and Resilience Scorecard, covering governance, technical diagnostics, ecosystem impacts, and planning  
   
• Strengthening safeguards to avoid maladaptation, ensuring solutions in one area do not increase risk elsewhere  
   
• Clarifying expectations on emissions, energy use, and methane, particularly in wastewater systems  
   
• Recognising water as a cross-sector risk, with implications beyond the water sector itself  
   
• Explicitly addressing both acute and chronic climate risks including long-term water availability reduction, catchment-level scarcity, and shifting hydrological baselines, recognising these as equally material to infrastructure resilience as discrete hazard events such as flooding 

Together, these updates provide clearer and more actionable guidance for issuers, investors and policymakers. 

Of particular importance is the treatment of methane emissions from water infrastructure. Wastewater systems including treatment plants and anaerobic processes are a significant and often underestimated source of methane, a potent greenhouse gas, and managing these emissions is central to ensuring that water investments are genuinely compatible with climate goals. The updated Criteria address this directly by requiring monitoring and mitigation plans for anaerobic and anoxic treatment components, setting energy efficiency thresholds for aerobic systems, and applying specific GHG quantification requirements  ensuring that the climate integrity of certified water bonds is not undermined by process-level emissions that have historically been overlooked. 

 
Scaling resilient water investment 

Water infrastructure remains essential, yet there are investment gaps. . By strengthening definitions, expectations, and verification approaches, the updated Criteria aims to build confidence in water-related investments and support the development of more robust project pipelines. 

This is particularly important as markets look to scale adaptation finance, an area where demand is growing but standards and frameworks have historically lagged. 
 

Looking ahead 

Closing the gap between water-related climate risks and investment is critical. The updated Water Infrastructure Criteria represents a step towards directing capital to infrastructure that is not only sustainable, but resilient, supporting communities, ecosystems, and economies in a changing climate. 

This development was sponsored by the Co-operators. 
 
 
'Till the next time,  

Climate Bonds