Water standards launched for bond market

Sustainable water investment continues to gather steam, with the launch of Water Infrastructure Criteria for the bond market.
The Water Consortium, an international group of climate finance and sustainability organisations including the Climate Bonds Initiative, Ceres, the CDP, the Alliance for Global Water Adaptation and others, launched the criteria as part of the Climate Bonds Standard programme.
This means that bonds can be certified as aligned with the science-based targets of the Climate Bonds Initiative if they finance water projects that meet the new standards. Projections for global financing needs for water infrastructure could reach $22.6trn by 2050, according to the latest OECD figures.
Other members of the group include public utilities and municipalities – both of whom are expected to tap the green bond market more and more in coming years to finance sustainable water projects. Many cities and provinces in the world are coming under severe water stress and risk of flooding from climate-related events, while corporates face the likelihood of higher costs for water use.
“Water security, compounded by a changing climate, may well be the defining environmental issue of the 21st century,” said Cate Lamb, Director of Water Security at CDP. “While the solutions may be complex, this new Water Infrastructure Criteria has just made it easier for investors and companies to ensure they are pursuing science-based water secure, climate resilient investments.”Initially, the criteria focused on ‘grey’ or manmade infrastructure, such as pipes, tanks and conventional water treatment systems, but it now also covers natural water infrastructure such as wetlands, forests and watersheds.
Just last week, insurance company XL Caitlin announced it would finance the development of blue carbon credits with The Nature Conservancy. The project is hoped to kick-start a market in which companies can offset their carbon emissions by financing the conservation and development of natural water infrastructure that that captures carbon, such as mangroves and wetlands.
“The need for widespread investment in new water infrastructure is integral to strengthening climate adaptation, building resilience and the development of sustainable cities. The broad reach of the new Criteria now gives issuers and investors an opportunity to assess the underlying impact of all water based investment against a science based standard,” said Monika Freyman, Director of Investor Engagement on Water for Ceres.
Although the new standards are climate-focused, water is one of the key investment areas that brings together social and environmental objectives. Last year, six Swedish investors including AP7, AP3, SPP, Storebrand, Skandia and the Church of Sweden formed a working group to look more broadly at how it can support sustainable water projects in the context of the SDGs. The sixth SDG calls for “the availability and sustainable management of water and sanitation for all”.