Water Security: Financing Global Water Resilience

POLICY BRIEF

Financing Global Water Resilience

Unlocking Investments for Water Security

10 November, 2026 | Sustainable Water

Pritish Kumar Acharya, Trisha Ravindranath, Ishleen Kaur, and Dr. Nitin Bassi

Suggested citation: Acharya, Pritish Kumar, Trisha Ravindranath, Ishleen Kaur, and Nitin Bassi. 2026. Financing Global Water Resilience: Unlocking Investments for Water Security. New Delhi, India: Council on Energy, Environment and Water.

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Overview

Water is a superconnector: few resources affect as many facets of the economy and society at once, linking everything from food and energy to industry, health and education. Every dollar invested in water and sanitation can generate up to USD 4 in economic value. Yet, despite its central role in driving economic growth and social development, water remains significantly underfunded. Meeting SDG 6 in low- and middle-income countries alone requires an additional USD 500 billion a year. However, the current financing landscape remains heavily skewed towards public funding, with public sources providing nearly 91 per cent of water sector spending, while private investment accounting for less than 2 per cent. This persistent financing gap is not simply a question of capital availability. Fragmented institutions, long payback periods, tariffs set below cost recovery, unclear regulation and growing climate risks all hold investment back.

Drawing on case studies from India and around the world, this policy brief demonstrates how strategic project design, stronger institutions, and innovative financing approaches can transform water infrastructure from an underfunded public service into a more investable and financially sustainable asset. These approaches show how capital can be structured to align with the distinct risks, hydrological functions, and investment profiles of the water sector. It sets out three mutually reinforcing levers: building the enabling governance environment, deploying financial instruments more strategically, and improving the bankability of projects. Collectively, these actions can help move the sector beyond financing water towards making water investable.

Key highlights

Enabling governance is the foundation. Clear institutional roles, stable and predictable regulation, and pricing that reflects local conditions give investors confidence and lay the ground for investment at scale. Fragmented institutional responsibilities, long investment recovery periods, tariffs that often fall below the cost of providing services, and the difficulty of translating water’s wider social and environmental benefits into financial returns continue to deter investors. Climate risks further add to these challenges, as infrastructure that does not account for future climate conditions may become less effective or financially unviable over time.
Different water investments call for different finance. Mobilising capital calls for moving beyond conventional utility- led projects and infrastructure investments to also finance the wider hydrological functions that sustain water systems. This includes investments in source protection, watershed management, aquifer recharge and ecosystem restoration, alongside traditional water infrastructure. Different types of projects require different financing approaches, tailored to their scale, maturity, revenue potential, implementation and climate risks, as well as their wider social and ecological benefit.
Bankability and hydrological viability must go together. Credible revenue models, clear risk allocation and well-prepared projects attract finance, but investments must also improve water availability, quality and resilience over time. Dedicated project-preparation support can help turn available capital into fundable projects while also ensuring that the water sources, ecosystems and hydrological functions underpinning these investments are adequately protected and sustained.

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Pritish Kumar Acharya

Research Analyst

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“Closing the water financing gap is not only about raising more capital; it is about addressing constraints across the entire investment cycle. That means enabling governance conditions that set clear rules and shares risk effectively, deploying financial instruments that fit the varied risk, maturity, revenue and impact profiles of water investments, and designing projects with viable revenue models and credible outcome measurement. The task now is to connect these pieces so that investment delivers measurable water security.”

Executive summary

Water is a superconnector: Few resources influence as many dimensions of the economy and society, from food and energy to industry, health, and education. Investments in water can yield substantial returns, with every dollar invested in water and sanitation generating up to USD 4 in economic value (OECD 2026). Yet, the sector remains significantly underfunded relative to its importance. This disconnect between investment priorities and the scale of water-related needs is reflected in the persistent and worsening global water crisis. Billions of people continue to lack access to safely managed water and sanitation: About 2.2 billion lack safely managed drinking water and 3.5 billion lack safely managed sanitation (Madani 2026), while disruptions to the global hydrological cycle intensify. More than threequarters of the world’s population now lives in waterinsecure countries, amid growing concerns about the possibility of global water bankruptcy (Madani 2026). The costs of delayed action are significant. Finance is needed not only to build and run water supply and sanitation infrastructure, but also treat used water and its reuse, cut leakage and other utility losses, manage floods and droughts, and protect the catchments, wetlands, and soils that sustain water sources. Yet, the sector remains significantly underfunded relative to its importance. An estimated 45 per cent of the world’s GDP might be at risk from water scarcity by 2050 if this growing instability is not addressed, endangering food systems, public health, and economic prosperity (WEF 2025a).

Bridging this financing gap will require a substantial increase in capital flows, with an additional USD 500 billion needed annually to meet Sustainable Development Goal (SDG) 6 targets in low- and middleincome countries (LMICs) alone (GCEW 2024). However, the challenge extends beyond insufficient funding. Institutional fragmentation across the water value chain and catchments, high investment risks due to long payback periods, tariffs set below cost-recovery levels, and unclear or inconsistently enforced regulatory frameworks constrain water financing. Together, these factors create considerable uncertainty for investors. Climate-related risks further compound these challenges; by 2050, droughts, floods, and storms are expected to result in cumulative economic losses of about USD 5.6 trillion across seven major economies (GHD 2022).

These constraints are reflected in the sector’s highly disproportionate investment profile: Public sources account for nearly 91 per cent of water sector spending, while private investment accounts for less than 2 per cent (Joseph et al. 2024). This imbalance reflects both the public-good character of water security and the barriers that deter private capital.

Closing this financing gap offers substantial benefits beyond water infrastructure and service delivery. Investments in water have the potential to improve public health, advance gender equality, strengthen food security, alleviate poverty, and build climate resilience and adaptation capacity. This policy brief draws on case studies from India and around the world to demonstrate how strategic project design, stronger institutions, and innovative financing approaches can transform water infrastructure from an underfunded public service into a more investable and financially sustainable asset. It also outlines emerging financing mechanisms and instruments, including resource-recovery revenue models, municipal and outcome-based bonds, payments for ecosystem services, and blended and catalytic financing. These approaches show how capital can be structured to align with the distinct risks, hydrological functions, and investment profiles of the water sector.

The case studies highlight three mutually reinforcing levers for unlocking investment in the water sector, as summarised in Table ES1.

Figure ES1. Recommendations and interventions for scaling water finance

Recommendation	Intervention	Evidence in practice
Creating an enabling environment for investment through governance reforms	Recognise water as a foundational input to economic value chains and create the conditions required to attract investment. Establish independent bodies or country platforms to oversee water projects and facilitate private-sector participation. Adopt ground-level water budgeting with differential, need-based pricing. Empower local communities to actively participate in the water value chain.	Egypt’s programme for the Nexus of Water, Food and Energy (NWFE+) Singapore’s Green Financing Framework China’s Sponge City Programme
Diversifying investment avenues and strategically deploying financial instruments	Mobilise the appropriate blend of public, concessional, and private capital across the full spectrum of water projects, rather than focusing exclusively on water utilities. Align financing with each project’s nature, scale, maturity, revenue potential, risk profile, and public-good characteristics, while accounting for the hydrological functions the project is intended to protect or restore. These include water quality, soil-moisture retention, groundwater recharge, flood regulation, dry-season flows, as well as opportunities for water reuse. Devise innovative, mixed-financing approaches and beneficiary-led models to support small-scale, local-level projects, such as nature-based solutions (NbS). Ensure that impact reporting of any water project captures the broader environmental, social, and economic co-benefits and identifies opportunities to capitalise on or incentivise these benefits.	Peru’s Mechanisms of Compensation for Ecosystem Services (MERESE) Australia’s Murray–Darling Basin water market India’s Tulsiwadi community toilets UK’s NbS by Anglian Water
Improving bankability through effective project design and management	Build bankability into water projects from the design stage, prioritising identifiable revenue streams and resource-efficiency benefits rather than treating financial viability as an afterthought. Identify financial risks early and, at the project design stage, allocate execution and operational risks to the parties best equipped to manage them. Address bottlenecks that stop allocated capital from being spent, such as weak project preparation and limited implementation capacity. Factor potential climate risks, and the cost of managing them, into the design and lifecycle costing of water infrastructure and utilities.	India’s Muzaffarpur faecal sludge treatment plant (FSTP) The Philippines’ East Zone Concession by Manila Water Company

Recommendation

Intervention

Evidence in practice

Creating an enabling environment for investment through governance reforms

Recognise water as a foundational input to economic value chains and create the conditions required to attract investment.
Establish independent bodies or country platforms to oversee water projects and facilitate private-sector participation.
Adopt ground-level water budgeting with differential, need-based pricing.
Empower local communities to actively participate in the water value chain.

Egypt’s programme for the Nexus of Water, Food and Energy (NWFE+)

Singapore’s Green Financing Framework

China’s Sponge City Programme

Diversifying investment avenues and strategically deploying financial instruments

Mobilise the appropriate blend of public, concessional, and private capital across the full spectrum of water projects, rather than focusing exclusively on water utilities.
Align financing with each project’s nature, scale, maturity, revenue potential, risk profile, and public-good characteristics, while accounting for the hydrological functions the project is intended to protect or restore. These include water quality, soil-moisture retention, groundwater recharge, flood regulation, dry-season flows, as well as opportunities for water reuse.
Devise innovative, mixed-financing approaches and beneficiary-led models to support small-scale, local-level projects, such as nature-based solutions (NbS).
Ensure that impact reporting of any water project captures the broader environmental, social, and economic co-benefits and identifies opportunities to capitalise on or incentivise these benefits.

Peru’s Mechanisms of Compensation for Ecosystem Services (MERESE)

Australia’s Murray–Darling Basin water market

India’s Tulsiwadi community toilets

UK’s NbS by Anglian Water

Improving bankability through effective project design and management

Build bankability into water projects from the design stage, prioritising identifiable revenue streams and resource-efficiency benefits rather than treating financial viability as an afterthought.
Identify financial risks early and, at the project design stage, allocate execution and operational risks to the parties best equipped to manage them.
Address bottlenecks that stop allocated capital from being spent, such as weak project preparation and limited implementation capacity.
Factor potential climate risks, and the cost of managing them, into the design and lifecycle costing of water infrastructure and utilities.

India’s Muzaffarpur faecal sludge treatment plant (FSTP)

The Philippines’ East Zone Concession by Manila Water Company

Source: Authors’ compilation based on the case studies in Sections 3-5: Egypt NWFE (OECD 2025a; Ministry of Planning, Economic Development, and International Cooperation 2024); Singapore PUB (PUB 2025); China Sponge City Programme (Liang 2018; Chan et al. 2022); Peru MERESE (OECD 2021; OECD 2022a); Murray-Darling Basin (Grafton and Horne 2014); Tulsiwadi and Muzaffarpur (Water for People); Anglian Water (Anglian Water Group 2024a, 2024b; CISL 2019); Manila East Zone (IFC 2014).

Together, these levers can help mobilise the right blend of public, concessional, and private finance tailored to different water-system functions. Governments can establish enabling regulatory frameworks, fund essential public functions, provide targeted risk capital, and support project preparation, thereby creating the conditions for predictable revenues and private investment where appropriate. Financial institutions can structure and scale suitable financing instruments, while utilities and project developers can design financially and operationally viable projects. Collectively, these actions can help move the sector beyond financing water towards making water investable.

FAQs

Why does water attract lesser investments despite its importance?

Water investments often have long payback periods and high upfront costs, while tariffs frequently fall below cost-recovery levels. Responsibilities are fragmented across the water value chain, regulation can be unclear, and much of the social and environmental value water creates is not reflected in financial returns. Together, these factors increase perceived risk and make water less attractive than sectors with faster or more predictable returns.
How should different kinds of water investment be financed?

Water investments differ in what they deliver and who benefits. A utility that recovers and sells treated water can earn its own revenue and attract commercial capital, while protecting a watershed benefits many people who do not pay for it and usually needs public or concessional support. The brief proposes matching financing to each investment’s scale, maturity, revenue, and social and ecological value, beginning with identifying the hydrological function being financed.
What makes a water project bankable, and is that enough?

Bankability needs to be built into project design from the outset, with credible revenue models, clearly defined risk allocation, predictable cash flows and measurable outcomes. However, since water is largely treated as a public good, financial viability is often considered secondary rather than an integral part of project planning. This needs to change. At the same time, bankability cannot be the only measure of a project's success. Projects must also demonstrate hydrological viability: their ability to improve water availability and quality, strengthen resilience, promote equitable access and protect ecological integrity at the relevant spatial scale and over time.