4 key steps for finance to take to tackle the growing water crisis

The financial community increasingly understands and accepts that the global climate and biodiversity crises are a systemic and financial risk. This has spurred action. Similar efforts to address the global water crisis have been slower to gain traction.

Persistent gap in the financing of water security

Warning bells have increased in just the last few months, with the world’s leading scientists from the Intergovernmental Panel on Climate Change laying out how dramatically the climate crisis is compounding and accelerating the water crisis. A new global assessment identifies the critical sectors and industries — as well as the business activities — most significantly affecting freshwater availability and quality, while another recent analysis underscores the persistent gap in financing to achieve a water secure future.

These messages make it clear that key financial players such as institutional investors, banks and development finance institutions urgently need to step up to address the water crisis.

Water risk is a systemic, material risk that is causing significant economic and social costs right now, from supply chain disruptions unleashed by climate-fueled flooding and droughts to water and food insecurity caused by dwindling water supply.

By failing to account for water security in financial decision-making, financial markets are contributing significant financial flows that are increasing exposure and vulnerability to water-related risks across the global…