Banking for Water Resilience
The intersection between the banking system and climate resilience has only recently emerged as a systemic regulatory and economic issue. While banks have traditionally served as a source of financial stability and economic security, they have occasionally triggered crises that can ripple throughout the larger economy. Their ability to safely hold funds and make loans are based on assumptions about risk, repayment, and liquidity that may be both violated and unquestioned by managers, investors, and regulators. Bank portfolios with traditional clients using water, such as agricultural businesses, or loans to households in flood prone areas or in areas with decreasing water resources, may be becoming financially more exposed. The so-called shadow banking system, which performs many of the same functions as formal banks and with roughly the same order of magnitude of economic power, may hold even more significant challenges because of more limited oversight or even visibility to decision makers.
This session from the Water Resilience for Economic Resilience (WR4ER) initiative explores how climate change and the need for water resilience are creating new opportunities and roles for the banking sector to better incentivize risk management by lenders and borrowers. Climate change undermines longstanding assumptions about risk that can challenge liquidity, regulatory regimes, and the very roles that banking services play. Moreover, climate change increases the needs for banking services among the most climate vulnerable water services providers and users and sensitive groups who may have been excluded completely or in part from the formal economy, such as through short- and long-term credit instruments, the secure deposit and accessibility of assets, and trustworthy interactions with the larger financial system. Not least, banks are often a core component of macroeconomic policy management, which should include building water-centric economic resilience and derisking climate hazards overall and in particular for water. Indeed, during recent social, economic, and epidemiological crises, banks have served as efficient instruments for applying coherent economic policies.
Innovative approaches that reinforce the role of water in banking services, implicitly and explicitly, are essential to prepare economies to existing and emerging challenges. For instance, loans can incentivize water resilience outcomes or prioritize equity and justice for access to water-dependent services for vulnerable populations.
Key questions for this webinar include: How can we ensure that the banking system — at local, national, and global levels — can continue to help our economies build wealth, promote economic stability, and fuel critical investment despite ongoing climate impacts? Can we align economic and climate resilience by expanding access to the most vulnerable without damaging the larger financial system? Moreover, by aligning regulatory and decision making systems with the climate needs and opportunities of key sectors and investments, can we leverage banks to enable systemic water resilience through long-term investment in water resources, infrastructure, and governance?
Speakers Include:
Nathanial Matthews - CEO, PlanetaryX
Ignacio Atance - Director of Studies, Fundación Grupo Cajamar
Thomas Panella - Senior Advisor - Water, Natural Capital, & Climate
Lylah Davies - Policy Analyst, OECD
Josefina Maestu - Honorary Lecturer, University of Alcalá, Spain
John Matthews - Executive Director, AGWA
Alex Mauroner - Chief Operating Officer, AGWA
This webinar took place on 10 September 2024. More info on the webinar series can be found on the Resilient Waters blog.