New climate-based Water Infrastructure Criteria will support sustainable investment in nature-based infrastructure

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The Water Consortium, a global group of climate finance and sustainability organisations, has formally launched the new Water Infrastructure Criteria of the Climate Bonds Standard.

The launch marks a major turning point in best practice for sustainable investment in water-based infrastructure and green/grey hybrid systems.

The final development phase extends the Criteria’s reach to cover nature-based and hybrid water infrastructure, such as wetlands and watersheds, that may be used for purposes of water collection, storage, treatment and distribution, flood protection and drought resilience.

This means that for the first time, nature’s water infrastructure such as watersheds, wetlands, and forests, which are essential for the provision of clean water around the world, can be protected, managed and restored, using Climate Bonds Certified green bonds.

Developed for potential green bond issuers and investors, the new Water Infrastructure Criteria defines and evaluates low carbon and climate resilient water infrastructure projects by encompassing two broad components:

  • climate mitigation
  • climate adaptation and resilience

The Criteria screens what types of water assets and projects can be included in green bond investment in water projects to qualify for Climate Bonds Certification. Certified projects must contribute to reductions in greenhouse gases over the lifetime of the asset, and must prove sufficient adaptation to changing climatic conditions.

Developed in two phases, the first phase of the Criteria covered both traditional ‘built’ or grey engineered water infrastructure for water treatment, flood defence, drought defence, storm water management, and ecological restoration and management.

Since the initial phase launch in 2016, about $1.5 billion of Certified green bonds have been issued against the Criteria in North America and South Africa.

The Criteria now fully recognise that ecosystems (including rivers, lakes, natural watersheds, aquifers and groundwater) are the original water infrastructure and are essential to meet local, national, and global resilience goals. Nature-based solutions are increasingly being integrated within formal water management systems as green and hybrid infrastructure.

The Water Infrastructure Criteria form part of the overarching Climate Bonds Standard, which provides investors with a verifiable, science-based screening process to evaluate bond investments in a variety of sectors, bringing climate mitigation, resilience and adaptation planning to the fixed income investment space.

The Water Consortium is comprised of the Climate Bonds Initiative, Alliance for Global Water Adaptation (AGWA; supported by the Stockholm International Water Institute), Ceres, CDP, and the World Resources Institute (WRI)

Patricia De Lille, Executive Mayor of the City of Cape Town commented:

“Being located in a water scarce region and in dealing with the harsh impacts of climate change with our worst drought in over 100 years, the City of Cape Town is acutely aware of the need to facilitate investment in water infrastructure. The development of these Water Criteria within the Climate Bonds Standard has enabled us to direct the proceeds of our bond towards critical projects within this space.”

“We welcome the expansion of the Criteria and hope it will stimulate much needed global investment in adaptive and resilient water systems.”

Monika Freyman, Director, Investor Engagement – Water, Ceres added:

“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. It provides a sound platform for increased green bond based investment in water and water assets.”

Todd Gartner, Director, Food, Forests & Water Program, World Resources Institute said the launch of the CBI green bonds Water Infrastructure Criteria would provide the added validation for development banks and other financial institutions to confidently invest in natural and hybrid water management systems, with clear recognition of the anticipated water, climate and financial benefits and returns.

Click here to download the Water Infrastructure Full Criteria