The importance of water security to broader economic development and resilience is increasingly internationally recognised, as reflected by the annual G20 Dialogue on Water as well as the preparations for the 2023 UN Conference on Water; the first of its in kind in nearly 50 years. Investments that contribute to water security span a range of essential infrastructure systems to deliver clean drinking water, reliable sanitation and to manage water resources and water risks. They deliver substantial benefits across multiple policy agendas, notably food and energy security, urban development, public health and education. The COVID-19 pandemic has also starkly demonstrated the importance of ensuring access to safe water, sanitation and hygiene as a critical element of reducing the transmission of infectious diseases.

This report distils key messages from the Roundtable on Financing Water, a joint initiative of the OECD, the Government of the Netherlands, the World Water Council and the World Bank, and related analytical work on financing water. The report benefitted from the engagement of several hundred participants in Roundtable meetings organised over the past five years, including global, regional (the Americas, Asia, Europe) and thematic meetings (on agricultural water and on climate action). Through partnerships with member countries (Israel, the Netherlands and the United States), key regional players (Inter-American Development Bank, Asian Development Bank, European Investment Bank) and other key organisations (the United Nations Food and Agriculture Organization), the Roundtable’s meetings have allowed for a deeper exploration of the contextual factors that influence financing approaches in different regions and investment types. This provides the basis for an up-to-date summary of the key challenges and opportunities in the water financing landscape and sets out a vision for future OECD work on financing for water security and the Roundtable.

Water-related investments deliver substantial benefits for water security and sustainable development. “Water-related investments” refer to a broad range of investments that contribute to water security through the delivery of water and sanitation services, the management of water resources and water-related risks (“too much”, “too little” and “too polluted”). Beyond the water sector, water-related investments connect multiple other sectors and policy agendas, including agriculture, energy, urban development, public health and education. Due to their cross-cutting and underpinning nature, such investments are central to achieving the Sustainable Developments Goals (SDGs), global climate and biodiversity goals and can contribute to a green and resilient recovery from the COVID-19 crisis.

This chapter sets the context and provides background for the following chapters of the report. It summarises the activities of the Roundtable on Financing Water since its establishment in 2017 and the related analytical work on financing water-related investment.

This chapter provides insights into the challenges related to financing water-related investments and why concerted policy action is required to overcome them. It helps characterise the order of magnitude of the challenge by highlighting estimates of investment needs and financing capacities for select regions (Europe and Asia-Pacific). It also presents data related to investment in agricultural water and trends in development finance for water. Finally, the chapter documents how water risks could translate into material financial risks, including by generating financial impacts on corporates.

This chapter presents options to address the financial challenge through a multi-pronged approach. It sets out the key components of the enabling environment for investment, consisting of policies, regulations and institutional arrangements for both the water and the financial sector. It highlights the need for making the best use of existing sources of finance and assets to minimise overall investment needs. Finally, the chapter discusses how strategic investment planning can help to optimise future investment needs, including through nature-based solutions.

This chapter presents a range of options to mobilise additional sources of funding and financing for water-related investment, by generating revenue streams, reducing investment risks, effectively using intermediaries and making use of blended finance where appropriate. The chapter documents a wide range of financing approaches and specific practical examples to illustrate how they have been applied in distinct contexts. Finally, the chapter reflects on opportunities for adapting and scaling up to new contexts.

This chapter summarises the key themes explored to date in OECD work on financing water and the Roundtable on Financing Water. It charts a course for future work on financing water and new initiatives taking shape that can support countries’ ambitions on the Sustainable Development Goal on water and sanitation.