The Policy & Practice of Climate Change & Water

AGWA Working Group on Climate Bonds & Water

A new Climate Bonds Expert Working Group, made up of key water sector and industry experts from around the world will be met for the first time today to develop criteria for water investments that can be used to back green and climate bonds certified under the Climate Bond Standard – an easy-to-use tool for investors and governments that allows them to assess the environmental integrity of bonds with confidence.
The water-focused Expert Group was brought together by the Climate Bonds Initiative, in collaboration with Ceres, the World Resources Institute and CDP (formerly Carbon Disclosure Project). The Group includes representatives of organizations such as the OECD, Asia Development Bank, Imperial College London, Alliance for Global Water Adaptation (AGWA), D.C. Water, Chinese Academy of Sciences and the Stockholm International Water Institute (SIWI).

Water-related investments account for an enormous part of the capital assets of developed countries, and are a huge part of investments being undertaken in developing economies. Meanwhile, a new Intergovernmental Panel on Climate Change (IPCC) report released this week shows that substantial climate adaptation infrastructure will be required to ensure future clean water supplies. A clear understanding of what sorts of investments are consistent with improving the climate resilience of water assets will help bond investors quickly determine the environmental credentials of water-related green bonds and climate bonds.

Investment areas such as clean water projects, water treatment infrastructure, agricultural usage, storm and flood drainage and protection will be explored, as well as energy efficiency thresholds required to qualify for climate bond certification.

Climate Bonds CEO Sean Kidney said: "The potential for green bonds in the water sector is enormous. While it may be tempting to define every water project as ‘green’, water investments that don’t take into account climate change, with, for example, its increased volatility of rainfall – dumps and droughts – will come to be seen as both higher risk and not consistent with green.” He added: “Currently, climate relevance is not clear for water projects; some of them may actually perpetuate high water consumption or poor water management with high energy usage. This makes the need for guidelines even more urgent – investors will want to be sure that investments don’t make matters worse.”

Sharlene Leurig, Director of the Sustainable Water Infrastructure Program at Ceres, a nonprofit sustainability group, added: “At a time when significant investments are needed in clean water infrastructure in the United States – anywhere from $300 billion to $1 trillion in the next 15 years - we need to make sure these expenditures account for current-day challenges and opportunities, many of them related to climate change. Such 21st-century clean water infrastructure has the potential to provide numerous co-benefits, including nutrient harvesting, urban green space provisions, habitat protection and renewable energy generation.  But all of these projects need to be undertaken in line with the need to adapt infrastructure to address the impacts of climate change.”

Betsy Otto, Director of the World Resource Institute’s Water Program said: “Green bonds not only create increased financial flows to meet the world’s demand for freshwater, but also ensure that these water infrastructure investments are more cost-effective, flexible, and environmentally sustainable in the face of increased water demand and climate variability. We see the Climate Bond Standard, as an easy-to-use tool that streamlines the investor decision making, as key to this process. Taking a common approach on project eligibility will ensure that these water investments bring benefits for the climate, water resources, and affected communities.”

Cate Lamb, Head of Water at CDP said: “According to a report from the UK Water Research and Innovation Partnership, the required expenditure globally on water and sewerage to 2050 amounts to $8,606 billion. This presents a huge opportunity to tackle the global water challenge, however managing our future water needs is, in effect, the climate adaptation challenge.  CDP views the development of the Climate Bond Standard for water infrastructure as a critical step in transitioning confidently and meaningfully to a low-carbon, climate resilient economy.”

Dr. John Matthews, Coordinator of the Alliance for Global Water Adaptation (AGWA), said: “Because of rapid economic and climate change, we live in an era when sustainability has become a moving target. No standards have yet been developed to evaluate how well we are managing water resources and ecosystems in a dynamic period. We need to design new standards that allow us to design, evaluate, and effectively invest in water resources that enables long-term, flexible, and truly sustainable water management for sustainable energy, agriculture, cities, and ecosystems.”