Financing water investment for global sustainable development: Challenges, innovation, and governance strategies

Abstract

Water is central to sustainable development as established in the official report of the High Level Panel on Water of the United Nations and World Bank. Such strategic importance of water justifies global demand for investment from all sources in the water sector to not only provide much needed infrastructure but also enhance the capacity of management and governance necessary to cope with complex water problems and risks, particularly under changing conditions characterized by climate change, urbanization, and environmental degradation. Yet, how to finance the investment need to build a strong water sector for sustainability is a practical question that has been gaining wide attention globally. This paper synthesizes current knowledge and understanding of water investment finance. It examines and characterizes water finance and challenges, encompassing economics and practice of financing water investment needs, the commonly considered finance model, and barriers for water finance in relation to the unique features of water investment needs and the water sector. It introduces some promising practices adopted or advocated to address the financing challenges, and highlights key governance and institutional strategies to help bridge the funding gap in the water sector. Based on the synthesis, the paper offers some discussion on the water finance issue in the end. This paper hopes to connect academia and development practice to stimulate communication while informing policy and management reform to better promote financing water investment for sustainability.

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