Water bonds

Climate scientists tell us we are now locked into a significant level of warming, requiring large investment in adaptation to minimize damage, especially in developing countries. Investment to date has been limited, with especially low amounts of private finance and expertise attracted to adaptation.

One of the main anticipated impacts of climate change is a reduction in availability of water. Water supply infrastructure is a “no regrets” investment: even without climate change, much of the world faces water scarcity. Water use is currently very inefficient, but efficiency technology is expensive.

A potential solution would be a Global Water Facility financed by water bonds, developed with governments of beneficiary regions. This could provide a guaranteed feed-in tariff for water supplies, i.e. if a company provided a needed and sustainable water supply, the fund would guarantee a minimum price level for this water. The price could be proportional to regional water scarcity.

As water provision-enabled economies grow, beneficiaries’ ability to pay will increase, and they could eventually pay for the water themselves. The tariff would then become redundant.

This could attract private investment into providing sustainable water. It would also indirectly increase food security if the water is targeted at food-growing areas.