Water investment critical to
a sustainable and just economy

Ambroise Fayolle & Henk Ovink

Together with air, water is arguably the planet’s most important natural resource. Functioning water systems are one of the technological pillars of civilization, which often means a water crisis is a matter of life or death. Today, about 2 billion people lack access to safe drinking water, and about half the world’s population experiences severe water scarcity for at least part of the year. Our limited freshwater resources are already overburdened by growing populations and water-thirsty economies. By 2030, global water demand will exceed the sustainable supply by 40 percent.
As demand for water grows and temperatures rise, water scarcity will threaten more lives and livelihoods – and therefore the stability of societies around the world. How can we turn the tide so that water empowers communities, secures our economies and keeps the planet livable? As with other global public issues, such as a clean environment, there is a tendency to focus on the costs of improvement today rather than on the greater long-term benefits of investing in the preservation of natural resources. The water sector is underfinanced and chronically short of capacity to meet demand. But if we want to achieve the UN’s Sustainable Development Goal of ensuring clean water and proper sanitation for everyone, we must increase the current global spending on water fourfold, to more than $1 trillion a year (equivalent to 1.21 percent of global gross domestic product). We also must make up for the $470 billion we lose every year through flood damage and poor irrigation.
By protecting the environment and the climate, every cent we invest in the water sector will boost our economies, now and in the future. When the European Investment Bank provided a €200 million ($215 million) loan to Jordan in December to finance a desalination plant on the Red Sea coast and a pipeline to the capital, Amman, the country’s planning and international cooperation minister, Zeina Toukan, described the projects as crucial for both water security and comprehensive economic development. We all need to adopt similar thinking about how we value and manage water. As is the case with many other challenges, the public sector cannot fill this large investment gap alone. Businesses also have an important role to play. According to the CDP, a not-for-profit organization that collects environmental impact data, more than $300 billion of business value is at risk globally if no action is taken to address water scarcity. Yet it would cost less than a fifth of that amount – $55 billion – to tackle the problem.
If businesses deploy new technologies to reduce their water consumption and exploit wastewater as a source of energy, heat, nutrients and materials, they can reduce their environmental footprint and free up more water for use by others. The CDP places the value of such “water-related opportunities” at $711 billion, reflecting not only savings on water use but also the growth of long-term potential markets in water-smart technology and the benefits of better community relations. But because water is cheap in most parts of the world, businesses often have little incentive to invest in saving water or in boosting the efficiency of water-intensive production processes. To persuade the private sector to focus on water-system preservation, we firstly need to start thinking of the money spent on water as a real investment, rather than as a cost that can never be recovered.
Secondly, the right value must be assigned to this water in order to create the necessary incentives for users and businesses to use it more efficiently, and for preservation to be economically rewarding. In the case of water, this requires a delicate balancing act because affordable access to drinkable water and proper sanitation is a recognized human right, which means it is nonnegotiable. Thirdly, global cooperation and new cross-border programs to mobilize greater investments in water would help to overcome market failures and prevent water from being politicized and weaponized. Last week’s UN Water Conference in New York, the first such gathering since 1977, was a unique opportunity to discuss water security, to tackle the crisis head-on and to acknowledge that water investment is as critical to a sustainable and just economy as is investment in clean energy.
We can establish new guidelines for fixing the water cycle and ensuring a more holistic approach to sustainable development everywhere, from the Netherlands and Luxembourg to Nigeria and Laos. And we must find more ways to incentivize water financing from public and private sources that are willing to wait for their investments to bear fruit. Water is what will carry the Sustainable Development Goals across the finish line. We must finally start recognizing it as a fundamental part of our investment portfolios, and put it at the center of our economic policies.