4 ways to scale up finance for India’s water sector

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Namita Vikas, Founder and Managing Partner, Auctus ESG, Sourajit Aiyer, Vice President, Sustainable Finance & ESG, AuctusESG & Cymroan Vikas, Research Associate, AuctusESG


  • India is on track for a 50% shortfall in its water supply by 2030.
  • There is also a big gap between the supply and demand of the finance necessary to rectify this problem.
  • Here are four ways to change the financing ecosystem so that we can avert this coming catastrophe.

While the world is reeling from COVID-19 statistics, the numbers on basic commodities essential for human survival are equally staggering. Water is a prime example.

One-third of the world’s largest groundwater basins have been depleted. Water shortages affect 40% of the global population. Many large-population cities, mostly in emerging economies, are severely water-stressed. The World Economic Forum ranked water crises amongst the top-5 risks in terms of impact in its Global Risk Report 2020. In India, a water supply shortfall of up to 50% is expected by 2030, as per UNICEF. According to federal think tank NITI Aayog, 21 major Indian cities are in immediate danger of running out of groundwater. Three-quarters of Indian districts, home to 638 million people, are hotspots for water-related disasters.

Since humankind cannot exist without water, substantial efforts are needed to improve its access. However, this costs money. The global financing gap in water is already estimated at $114 billion for SDG targets 6.1 and 6.2 alone.

Here are four ways to improve the financing ecosystem for water, focusing specially on India – a country home to 18% of global population but which ranks a dismal 120th on the Water Quality Index.

1. Policy, reforms and governance. Instituting an independent water regulatory authority and mandating disclosures by water-intensive industries on water usage, treatment and recharging must be priorities for the government. Leveraging India’s priority-sector lending norms for banks or mandating a specific allocation for water in infrastructure debt funds – or in the development finance institution proposed in India’s recent budget – can attract dedicated capital.

Reforms must encourage municipalities to issue financial instruments. Recent muni-bonds by the cities of Ghaziabad and Pimpri-Chinchwad are a good start. Regulations that scale up nature-based solutions, like porous pavements that absorb stormwater, can also help create resilience to climate shocks. Policies must replicate global use-cases like Chicago’s green-roof initiative or Singapore’s target to become a ‘city of gardens’ by integrating its canals. Indian textile manufacturer Arvind has constructed a wastewater treatment facility in its Gujarat apparel factory to save groundwater for local communities. Policy-makers must create incentives for more industrial units to implement and scale up these kinds of measures. Last, the development of usage-based billing (using smart metering) or tax-slab based tariffs for water may enable the generation of internal revenue.

3. Developing innovative financing structures. Since it is tough to ensure cash flows towards development sector projects (like water), innovative financing structures to mitigate risks become necessary. Blended finance structures that combine public and philanthropic capital with private investments using credit enhancement instruments can be useful. For example, The Philippines’ Water Revolving Fund blends aid and public funds with commercial finance to offer a lower cost of capital to water service-providers. WaterEquity’s WCIF3 fund uses a blended approach through low-interest loans and first-loss guarantee. Pooled funds – such as the Kenya Pooled Water Fund, which pools domestic pension and institutional money – fit into this category.

More than half of India faces high levels of water stress today
More than half of India faces high levels of water stress today Image: WRI / Indiawatertool.in

Solar energy projects in Kenya and Rwanda have demonstrated the power of the pay-as-you-go (PAYG) model to tackle the issue of relative unaffordability – and this model can be extended to water. In irrigation, India’s Claro Energy offers a PAYG service using e-rickshaws fitted with solar panels, which then power water pumps. The hybrid annuity model (HAM) is an instrument that reduces the pressure of upfront payment in long-gestation projects like water. This is relevant for projects that entail operating revenue. The yieldco approach disaggregates low cashflow-yielding activities from high cashflow ones, reducing perceived risks for investors. Pension funds, often signatories of the UN’s Principles for Responsible Investment (PRI) network, are looking at emerging economy infrastructure. Extending this to water infrastructure in India would attract patient capital. Lastly, combining corporate social responsiblity funds with outcome-based financing would help achieve measurable outcomes. And instruments like blue bonds, which are mainly focused on marine conservation, must be extended to water projects. Given the challenges of water as an investment avenue, most solutions will require innovative structuring.

The third method connects with investor action. This includes improving investor engagement as well as the disclosure of water risks to facilitate investor confidence. A deeper understanding of the sector would augment investor interest; Ceres’ Investor Water Toolkit helps investors to identify, evaluate and manage water risks in investment decision-making. PRI and WWF have together developed a Water Stewardship Framework which includes practices for facilitating investor dialogue with companies. The usage of such toolkits and frameworks must be encouraged in water-risk nations such as India.

4. Community-based models. This includes water-tech solutions managed by communities. Small-scale water ATMs – which can be located in villages, stations and slums – provide access to low-cost clean drinking water in places where last-mile connectivity is a logistical challenge or where packaged drinking water is unaffordable. Water.org’s WaterCredit combines microfinance for local communities with loans for water solutions. Community-based peer-to-peer (P2P) trading models can spur rainwater harvesting by creating an incentive for collection. Bangladesh’s SolShare has demonstrated this P2P model with solar home systems. Of course, education and creating awareness are a prerequisite for creating buy-in from communities.

At the end, given water’s role as an existential resource in a world whose population is growing, it is urgent to drive stakeholder action towards water financing. The silver lining is scalable interventions are possible. Scaling up, and replicating such interventions in other places, can go a long way towards improving the worrying water statistics we are currently facing.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

International community agrees on a road map for resolving the tax challenges arising from digitalisation of the economy

‘Crimes against humanity,’ ‘war crimes’ and risk of new ethnic violence in DR Congo, warn UN experts

Statement by OECD Secretary-General Angel Gurría on the outcome of COP 25

‘Maintain calm’ and ‘exercise patience’ UN envoy urges, as Nigeria heads to polls

The refugee crisis seen through the eyes of a young doctor from Turkey

Cleantech innovation is being stifled. Here’s how to unlock it

Basel III rules relaxed: Banks got it all but become more prone to crisis

These are the world’s 10 most innovative economies

4 myths about corruption

How to reimagine our cities as hubs for biodiversity, conservation and climate resilience

OECD and European Commission join forces to further support structural reforms in European countries

3 ways to protect LGBTI rights across the world

Commission disburses €14 billion under SURE to nine Member States

Protecting refugees in Europe: UNHCR calls for a ‘year of change’

‘Bicycle Kingdom’ makes a comeback, as China seeks solutions to tackle air pollution crisis

GSMA Announces First Keynote Speakers for 2019 “MWC Los Angeles, in Partnership with CTIA”

Palliative Care: A Gap to fill in healthcare service

5G will redefine entire business models. Here’s how

‘Catastrophic’ healthcare costs put mothers and newborns at risk

The Eurogroup protects Germany and blames others

How to talk about climate change: 5 tips from the front lines

Global Cooperation for Local Action: Fighting antimicrobial resistance

The future of crypto-assets, from opportunities to policy implications

This is what different countries are doing to stop coronavirus from spreading

Future-proofing the European banking market – removing the obstacles to exit

Why trade wars have no winners

Ηealth’s foundation is falling apart: what can we do about it?

European Commission and European Investment Fund launch €75 million BlueInvest Fund

Trade war or not New York bankers will have it their way

How building renovations can speed up the electric vehicle revolution

European Youth Capital 2018 : Cascais

Central African Republic: Guterres says UN mission committed to protecting civilians, helping stabilize country, as violence flares

Turkey needs to step up investment in renewables to curb emissions

Commissioner for Crisis Management in Kabul: EU steps up humanitarian assistance with €32 million

Senior UN children’s advocate says they ‘should never be targeted by violence’

A Sting Exclusive, the European Commissioner for Energy Günther Oettinger writes for the Sting on “EU Industry: a major energizer”

Chart of the day: These are the cities where the World Cup threatens productivity the most

Wash your hands, but keep your mind clean

Human rights breaches in Bangladesh, Cuba and Vietnam

New UN-supported farming app is cream of crop in tackling Sahel pest

Privatisation and public health: a question of Human Rights

Can this billion-dollar initiative save the world’s tropical forests?

European Investment Bank to borrow €70 billion in 2013

‘These are very dark times for Yemen’: senior UN official on air strike mass casualties

Why and how did ISIS and Muslim fundamentalism gain momentum this year?

Brexit: when the hubris of one man can set the UK, the EU and the entire world on fire

Warmongers ready to chew what is left of social protection spending

State aid: Commission refers United Kingdom to European Court for failure to fully recover illegal tax exemption aid of up to around €100 million in Gibraltar

Youth Forum calls on Parliament to ease entry into Europe for young people

Better sanitation for India is in the pipeline

Why transparency in drug pricing is more complicated than it seems

COVID-19: faster authorisation for vaccines adapted to variants

As inequality grows, the UN fights for a fairer world

DiscoverEU: 20,000 more young people will explore Europe in 2020

‘Undersea gardeners’ are restoring Jamaica’s lost coral reefs

The global response to the coronavirus pandemic must not be undermined by bribery

Banks must take bold action to fight climate change. This is how they can do it

COVID-19 threatens the developing world’s small businesses. This is how to save them

Chronic illnesses: UN stands up to stop 41 million avoidable deaths per year

Mediterranean migrant drownings should spur greater action by European countries, urge UN agencies

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s