A Water Summit hosted by The Financial Times in London this week will see leading figures from the world of finance and companies heavily dependent on water coming together to discuss innovative financial solutions to water management challenges. WWF will be there too, to share ideas on how to assess investment portfolios so as to transform risks into opportunities.
If there is one natural resource that many of us take utterly for granted it is freshwater. It falls from clouds, flows in rivers and then emerges from taps in an apparently seamless series of connections that ensure our needs are met almost without a second thought. In many places, the ‘life liquid’ seems to be abundant and inexhaustible. This is an impression that couldn’t be more misleading, however. Freshwater is, in fact, a highly limited resource, and not only in those places regarded as arid but also at a planetary level.
Of the 1.4 billion cubic kilometres or so of water on Earth, 97.5 per cent is in the ocean and is therefore salty and of no use for farming or public supply. Of the remaining 2.5 per cent, more than two thirds are locked in ice caps and nearly all of the rest is the ground. Just 0.3% of the freshwater is actually in rivers, swamps, lakes and clouds. It is upon this tiny sliver of our planet’s total water that our civilisations, economies, business models and all life on land depend.
This limited critical resource doesn’t stay still of course, it’s constantly on the move, shifting not only in space but also in form, as evaporation and freezing lead to water being found on Earth in three forms at once – vapour, ice and liquid – all of which are vital in sustaining the biosphere within which all known life exists. The fact that the liquid freshwater is replenished is down to what is a set of rather miraculous natural processes that add up to what we call the water cycle.
Water evaporating from the surface of the ocean to form clouds is where it starts, with rain over land being one result. But that is not the end of the story because ecosystems also play vital roles in sustaining water security. For example, tropical rainforests pump moisture into the atmosphere which travels vast distances within ‘sky rivers’, transporting this water from the forests of Central and South America to the Great Plains of the USA and Canada. In turn this moistens some of the world’s most productive farming lands.
Cloud forests harvest moisture from mist, enabling river flow even when it doesn’t rain. Wetlands hold water in the headwaters of rivers and help to replenish groundwater and thus springs. Healthy soils hold water that tops up rivers, sustaining and moderating flow and maintaining purity. Eventually, rivers flow back to the ocean, where new evaporation driven by the power of the sun moves water back to the atmosphere, creating clouds.
That at least is how the water cycle once worked. Human population growth and economic development have placed huge demands on freshwater, causing in some cases serious disruption of natural processes. Clearance of forests and drainage of wetlands, soil damage caused by industrial farming, pollution from factories and farms, the withdrawal of more and more water for farming and industry and the canalisation and damming of rivers are among the pressures on freshwater that have recently grown and which continue to intensify.
That pressure has led to widespread degradation of the freshwater environment and this is being exacerbated by volatility in the water cycle caused by climate change, with both drought and more intense rain among the consequences. Whereas the causes of the pressures on the water environment hitherto contributed to economic growth, the impacts we have seen now threaten water security globally, and thus future economic development. Indeed, in some parts of the world disruption to the water cycle has recently caused an economic impact. Recently in Brazil, key economic sectors including farming and hydropower have been hit hard by water shortages, which has been linked with deforestation in the Amazon.
This new circumstance, whereby in many places water risk is growing, requires a new approach to water management, including how investments that affect the water cycle are designed and prioritised. One shift in perspective requires that finance is channelled toward the recovery of a healthy water cycle, expanding forests, promoting soil recovery, restoring wetlands and reducing pollution.
There are already examples of where investments into the health of the water cycle are being made. For example, some British water companies are investing in recovering the ecological health of catchments as one means of securing clean water at a lower cost. In the tropics, some companies are investing in the conservation of rainforests, in part to sustain regional water security in areas from where they source agricultural produce.
These kinds of pioneering investments can be blended with public finance to leverage greater impact. For example, in the UK it is intended that a new post-Brexit farming policy will direct agricultural subsidies toward environmental improvement. The new approach, based on the idea of ‘public money for public goods’, will present opportunities for agricultural payments to be blended with private sector investment to pay for improvements that not only bring benefits for cost-effective and secure freshwater provision but also co-benefits for carbon, wildlife and flood risk reduction.
In tropical forest landscapes, official money coming via the Reducing Emissions from Deforestation and Degradation (REDD) scheme can be blended with private money to leverage bigger benefits in relation to not only water but wildlife, smallholder livelihoods and carbon too.
Perhaps these and other early instances of new approaches will inspire a different mindset and a new category of projects that might be described as ‘green infrastructure’. In the case of water, this includes rebuilding key ecological elements of the water cycle, and through that future water security. That, in turn, will lay the foundations for future economic development.
At WWF we know this can work because we’ve been in the field pioneering collaborative projects to protect and restore the water cycle, including in some of the most threatened river basins river basins. Teams operating in the Ganges, Mara, Mekong, Pantanal and Yangtze catchments have been working to reveal how the benefits that arise from healthy freshwater ecosystems are of vital importance to communities and businesses, and that these benefits can be enhanced by improving the condition of the freshwater environment. This work, part of the HSBC Water Programme, showed the scale of the opportunity, but also how much more there is to do. The simple fact is that more companies need to realise the importance of protecting our precious water sources and start factoring water risks into their supply chains, and in so doing to realising important upsides for business, people and nature.
At WWF we hope the FT Water Summit will raise awareness of the possibilities, revealing how financeable projects are now appearing and are creating opportunities to manage risk while securing returns whilst also repairing aspects of the water cycle that sustains life on land.