IFC: Investors and governments must collaborate on water security solutions
International organisations, investors and governments must tackle water security together by increasing investment and encouraging efficiency, says the International Finance Corporation (IFC).
By 2015, an average annual investment of more than $200bn (£128bn) will be necessary for water and wastewater services worldwide, according to OECD estimates.
Since public resources are being strained, due to the economy, the majority of this must come from the private sector, according to the IFC.
Fortunately, despite an uncertain economic outlook, investors are “showing interest”.
“Pension funds are embracing water stocks because they involve secure, multi-year contracts, and investment managers are looking to water because it offers steady, low-volatility returns for their clients,” says the IFC.
These incentives will continue to grow as pricing for water becomes more aligned with its true cost, and as innovation and new technologies create lower-cost ways of managing water.
However, governments “must also take action” through water and sanitation infrastructure projects, which generally require large, up-front capital investments, with costs recouped over the long term.
The IFC, a member of the World Bank Group, says: “While private investors can supply some of the funding, governments have to assure the right regulatory framework and cooperation to support them”.
In addition to heavy investment, the IFC has highlighted the importance of encouraging efficiency.
The IFC has partnered with private companies to start the Water Resources Group (WRG), which is a public-private collaboration that looks at the issue of sustainable water management between its different uses.
The WRG’s activities aim to help policymakers make the right choices and “plan for the future”.
In some countries the greatest room for increased efficiency is in the industrial sector. In China, for example, it takes almost 3000 litres of water to produce one cotton shirt, highlighting the need to implement efficiency measures.
However, with the agricultural sector using 70% of the world’s water – and wasting half of this – the majority of countries should be focusing their efforts in this area, according to the IFC.