Ensuring resilient water infrastructure in a changing climate

 

"In the face of climate change, water has become both our greatest challenge and our most powerful tool for building resilience."- Bapon Fakhruddin

Ensuring resilient water infrastructure in a changing climate is not just important for our water security - it is also fundamental to our broader economy.  Recently, for example, the Water Resilience for Economic Resilience Initiative has argued that in these times of climate change, water has a double role, being both a major hazard of climate change and a powerful means to implement resilience within the broader economy. Water provides us with a key element to promote this resilience and steer economic development. Therefore, they argue, water should be at the forefront of economic planning for resilience.

I fully agree with the statement.  Water is a critical resource that underpins various sectors of the economy, including agriculture, manufacturing, energy, and cities. Climate change is already causing significant impacts on water resources, such as increased temperatures, more intense droughts, and extreme flooding events. These impacts pose challenges to economic development, as they disrupt overall water security elements, affecting various economic activities.  If one looks at the sectoral impacts on economy has quite a strong interdependency with water. When you then bring in climate change as a critical element, there is a fundamental relationship and interdependency between the sector, water and climate change: one cannot talk about agriculture or energy without taking about water.

Climate change is having a fundamental effect on the water sector, and if we look at this from the point of view of Integrated Water Resources Management (IWRM) itself, there is an impact of decision making not only on the economy, but also on key aspects of the national development goals and issues such as food security, environment, health and of course SDG 6. Water management has a huge economic impact, and if you are able to ensure that IWRM has been embedded into decision making through processes like multicriteria assessment, it is possible to make judgements about how to make the most efficient use of limited water resources. The modelling is quite complex, but it is possible to make these decisions using  tools, technologies and engineering solutions available currently. To deal with complexity and to approach multicriteria analysis, we need first of all to be in tune with the cross-domain, interoperable data integration system which can helps us to assess overall risks and barriers. Once you know your barrier and risk, it makes it possible to come up with activities that could help our planners and  policy makers to make best decisions.

At the same time, we are facing cascading, compounding and complex changes that need to secure sufficient investments to ensure not only that we are climate ready, but also that we deliver on global and national goals in the water security and it’s linked sector.  The World Bank has just completed a first of its kind 360-degree review of spending in the water sector across the world. It finds that total spending is U.S. $164.6 billion, of which 85.5% is public spending, 6,9% is Official Development Assistance (ODA), 5,9% is through state-owned enterprises and the remaining 1,7% is private investment.  Public spending dominates the sector although ODA is significant also. Nevertheless, despite these investments we are clearly not on track for the achievement of the 2030 Goals, let alone ensure climate resilience of the sector.

In fact I would argue that we need a lot more than the 164 billion dollars available, while in fact the total demand for investment in sustainable development is of the order of 6,7 trillion dollars. Therefore, we are facing a huge gap. Therefore, one first has to ask,  who has this money? And it soon becomes evident that no-one has this kind of money available, not even the multilateral development banks. This means that we have to change our financing model, and collaborative engagements to ensure long term sustainability.  Different financing models are required, such as revolving loans, water bonds, or public private partnerships, to provide longer term financing.

Thoughts that come to mind are questions around how you create collaboration between multilateral banks, finance institutions, philanthropy and private sectors and make sure that there is no duplication of efforts. We also need to look at scaling up because we tend to have a project focus, but we need to ask whether a project solves a particular problem or we need to look more programmatic approach. Similarly, governments may make plans, but there needs to be careful thinking around the mobilisation of investments to finance these plans and their vertical and horizontal linkage.

There are some interesting new approaches, such as the emergence of blue bonds. These clearly do have potential, but in order to set this in motion, you need proper legislation and policy in place, and also the initial investment is high – governments do not always want this kind of up-front investment. In the case of disaster responses, it is possible to take out disaster bonds which enable one to access funds immediately if there is a problem that one needs to respond to.

There is an argument to be made that it is a lot about the enabling environment: about having the legislation in place, about having a very clear framework for public- private cooperation, and about the government being prepared to walk that route and to put the things in place that are needed to unleash the power of things like blue bond investments.

Furthermore, if we look at the water space, on themes like the need for the private sector to engage in the water sector, we have been discussing this for decades, but in reality the private sector does not tend to invest, because they do not see a risk free environment in the sense of legislation and policies that enable them to derisk their investment, and if you cannot provide these kinds of things, nobody will come and invest their money.  There are interesting examples,  for instance you have this system of twinning of utilities whereby for instance a Dutch utility will twin with a utility in Indonesia in a partnership for ten years, and this fundamentally affects the confidence of banks and the bankability of proposals in an environment in which the receiving utility may be in a difficult position financially.

his is why it's so important to create the right conditions for investment. These partnerships can help us get more funding. At the Green Climate Fund (GCF), we believe in innovative financing. We're the only global fund that can offer flexible financing. There are many example where we offered 0% interest rates for 30 years to bring flexibility for sustainability. If you need an instrument like a guarantor o equity to support your utility, we have all flexibility.  Countries should utilize the financing options we have at our disposal.  We also have readiness funds.

These can be used to prepare the right conditions for investment by creating the right laws and policies. This can attract more donors and investors.

The challenge remains that because of the siloed environment of the water sector, the water sector does not have a strong relationship with the ministry of finance or the ministry of environment. Climate finance tends to go directly to the ministry of finance or the ministry of environment, so unless there is strong interdepartmental collaboration, it will be difficult for the water sector to access that finance.

Going back to the World Bank report, there seems to be only paltry public spending on the water sector, indicating that only 1,2% of public funds are devoted to the water sector on average, whereas spending on 'human development' such as education, health and other can be up to 50 times higher. In a sense we are barking up the wrong tree and water could be mainstreamed more within health and education sectors as a critical element for both of them.  Leveraging change and accelerating investments for a water secure future requires a comprehensive approach that involves collaboration, innovation, establishing metrics, mobilizing financial tools, and improving the resilience of the water sector. By implementing these measures, we can strive towards achieving the 2030 goals and ensuring the climate resilience of the sector. Water is being used as a leverage or sideline support for other sectors, but we need to bring water to the forefront of our thinking.

For climate resilience we need to recognize that much of our existing water infrastructure, especially for storage systems such as dams as well as the irrigation sector, is based on historical rainfall (precipitation) records. In an era of climate change, we can no longer rely on this record to predict the future with confidence. This would seem to imply that investments in climate resilience in the water sector are inherently risky and even a touch experimental.

To increase the confidence in our investments in the sector we need to have a risk-based decision-making system. Unless you understand your overall climate risk – which is an overview of the associated exposure, hazards and vulnerabilities -you cannot assess the lifetime of your asset. Infrastructure designed for a one in hundred-year event may not last one hundred years because of a changing climate. Once you understand these risks you will be able to fine tune the design aspect and implement the project. There is quite a standard way to do this: it is necessary to assess the vulnerabilities, the exposure to hazards that is associated with the infrastructure, and develop a dynamic, adaptive pathway which provide step by step mechanisms to respond to needs.  Also we must act decisively and innovatively. There are several tools, technologies are available for assessing risks and guiding our investment decisions. Investing in climate-resilient infrastructure is no longer optional; it is imperative. We must bolster our water storage capabilities, strengthen flood defenses, and secure our water supply systems. Nature-based solutions, as demonstrated in many countries, offer a promising path forward. Finally, collaboration is key. As we plan for the future, we must consider multi-sector trade-offs and embrace both incremental and transformational adaptations. Our strategies must be comprehensive and far-reaching.

This involves adopting an incremental approach, whereby one is planning for the long term, but working in segments or modules, evaluating each step in turn and making decisions on the next intervention based on the results achieved. You need a proper health check for your assets: asset metering , using new sensors and related technology which can help monitor the health of an asset on an ongoing basis and assess its overall life span. There is quite a lot of new technology which enables real time monitoring of assets.

It could actually be a revolution for your asset management perspectives, because if you understand your assets, you can actually reduce your operations and maintenance costs. Instead of being faced with critical damage, you can act in advance to ensure ongoing maintenance.

The Green Climate Fund has a large portfolio of investments aimed to achieve a water secure future, and it has now entered a new phase of co-production of projects with partners which is more iterative and in which the GCF is using its store of knowledge to propose interventions from its side also. This is about how we have evolved to support direct access to the GCF for countries (including, as well as about supporting private sector involvement. We do not want to act as a post office anymore, but we prefer to work together on a proposal. We have often received the comment that the application process can take time and it is often difficult for countries to distinguish development issues from climate change issues. Our funds are for climate change impacts, and to help understand where we bring the additionality and complementarity, it is more fruitful to work through co-production. We have managed to reduce the transactional time, whereby in stead of having several iterations of a proposal with a turnaround time to more faster and quicker to access funding.   

This new process may initially be complex as required stakeholder engagements and sharing ideas on transformational adaptation, climate impact and paradigm shift, and it is necessary to spend time together with your partner to share new ideas, innovative technologies and solutions that could be brought to the market. This process is faster than receiving a concept note and going back and forth with comments, we spent too much transitional time, energy and money on this process. Using a co-design and co-creation ensure a more interesting projects, moving beyond traditional thinking to paradigm shifts.  

 

The GCF has entered a new phase of co-production of projects with partners, using its store of knowledge to propose interventions. This iterative approach allows for the integration of local knowledge and expertise in project design and implementation. The GCF's new direction emphasizes the importance of collaboration and knowledge-sharing in addressing the complex challenges of water security and climate change.