Nature-based solutions (NbS) for water security can address a number of challenges simultaneously and deliver co-benefits. Broadly, NbS protect, sustainably manage, and restore natural and modified ecosystems to address societal challenges (Cohen-Shacham et al., 2016). NbS approaches for water security include source water protection, watershed management, sustainable drainage systems, and wetlands restoration and construction. By improving the timing, location, reliability, and quality of water, NbS can improve water supply and quality, and contribute to disaster risk reduction. Co-benefits include improvements to human health, livelihoods and biodiversity, and increasing climate change adaptation and resilience.
NbS generally are growing in prominence on the policy agenda. For example, the Global Commission on Adaptation recommends scaling up the implementation to support climate change adaptation (see, for example, Kapos et al., 2019). NbS can also support greening the recovery following Covid-19. The potential for investing to receive multiple benefits rather than the traditional single-purpose investment is likely to be important in the context of reduced overseas development aid (ODA) budgets and potential capital flight northwards. There is also potential to link NbS with job creation and sustaining livelihoods as part of recovery efforts. For example, funding for coastal habitat protection in the USA in 2009 stimulated job creation following the 2008 financial crisis (Edwards et al., 2013).
Integrating green and grey infrastructure solutions can effectively address water security and a blended approach may be appropriate in a number of circumstances (Browder et al., 2019; Altamirano, 2019). Blended or hybrid solutions could potentially increase the attractiveness of NbS to investors and help to mobilise finance. Green infrastructure can complement grey by reducing the costs of engineered solutions and improving overall system performance (Browder et al., 2019; Kapos et al., 2019; Matthews et al., 2019; Abell et al., 2017). Unlike grey infrastructure, which is designed as a solution for one particular problem, NbS can be designed to address a number of water security challenges simultaneously (e.g. wetlands that promote water quality, erosion control, disaster risk management, and sustainable fisheries), support climate change adaptation, and have lower recovery costs after an event than grey infrastructure (ICEM, 2019; Kapos et al., 2019; Vogl et al., 2017).
However, limited access to finance is a key barrier for scaling up implementation of NbS for water security (Kapos et al., 2019; Tremolet et al., 2019). Whilst investment in NbS for water security is growing, it is still dwarfed by the amounts invested in grey infrastructure. NbS attract approximately 1-5% of investment in water security globally (WWAP/UN-Water, 2018; McCartney, 2020), and NbS generally, not just for water security, only attract a small share of climate finance. The characteristics of NbS, including the long-time scale for realising benefits and the diffuse nature of benefits and co-benefits, pose challenges for both public and private investment.
- There are two potential courses of action to increase the amount of finance invested in NbS:
1. increase the number of bankable projects by supporting the development and preparation of projects that can be accommodated by existing investment processes, and de-risking projects to make them more attractive to investors.
2. supporting systems change and changes in the enabling environment. This could include regulatory and legislation changes to incentivise investment, or the development of tools and guidance that align NbS as an option, placing them on a level playing field with grey infrastructure, which has been more traditionally used to address water security challenges.
- There are a number of emerging funding models and financial mechanisms for water projects that could increase the uptake of NbS. This report highlights a small number, including Blended finance approaches (e.g. the Philippines Revolving Water Fund), Green bonds and climate bonds, Water Funds, and Climate finance.