Optimizing financing for transboundary water cooperation and basin development worldwide

Global estimates for financing needs for water-related investments to achieve Sustainable Development Goal 6 on water range from $6 .7 trillion by 2030 to $22.6 trillion by 2050, according to the OECD. Investments are needed not only to build new infrastructure but also to maintain and operate existing facilities and ensure the sustainable and cooperative management of water resources.

While transboundary rivers, lakes and aquifers, accounting for 60 per cent of global freshwater flows, are of crucial importance for the sustainable development and political stability of riparian States, the financial means for their management, development and protection are currently insufficient in most parts of the world. Mr. Osward Chanda (Acting Director, Water Development and Sanitation Department, African Development Bank (AfDB)) pointed out that, alongside governance, funding to exploit such shared resources sustainably and equitably for shared regional peace and stability was imperative in line with Sustainable Development Goal target 6.5.

The lack of funding and financing is due to numerous challenges related to financial constraints in basin countries, different and competing priorities for funding within countries, or an often-limited consideration of the benefits of cooperation and a related lack of willingness to put financial means towards it. Consequently, the financial issue can easily become a bottleneck that prevents riparian States from realizing the full potential of cooperation benefits they could harvest in their shared basin.

In recent years, UNECE, as the secretariat of the Water Convention, has been working, under the leadership of the Netherlands and Switzerland, and in collaboration with Senegal and several partners including the World Bank, AfDB, the European Investment Bank, the Asian Development Bank, OECD and others, on increasing understanding and capacity on financial resources that can be mobilized for cooperation processes and projects.

This work led to the elaboration of the publication entitled Funding and Financing of Transboundary Water Cooperation and Basin Development, launched at the ninth session of the Meeting of the Parties to the Water Convention. Inspired by the outcomes of the virtual workshop on financing transboundary water cooperation and basin development organized by UNECE and partners in December 2020, this publication aims to provide a comprehensive understanding of what financial resources can be mobilized for water cooperation processes and activities to contribute to conflict prevention and the promotion of cooperation and peace.

Mr. Gustavo Alberto Fonseca, Director of Programmes, Global Environment Facility, welcomed the publication as an important contribution to the global discourse, saying that he trusted that it would contribute towards a shared understanding of needs and resources available for transboundary water cooperation and basin development.

Building on concrete case studies from transboundary basins worldwide, the publication differentiates between public and private financing sources, as well as between domestic and international sources – ranging from the financial resources provided by a riparian State that should be the primary funding source to loans, grants and technical assistance provided by development partners and innovative funding mechanisms (e.g., climate funds or blue peace funds). Furthermore, private investment, possibly in the form of blended financing, plays an increasing important role, specifically in investment projects in water resources. Such investment does, however, require an enabling environment that limits the risks for investors – especially those risks arising from the transboundary nature of basins and resources.

Building this enabling environment requires strong joint institutions and institutional frameworks. Ms. Christina Leb, Senior Counsel, Environment and International Law Department, World Bank, recognized that, as the publication highlighted, basin-level agreements and the establishment of joint institutions were critical both for facilitating coordinated and sustainable development of shared freshwater resources and as evidence of country commitment to cooperation, as they were key factors in attracting and accessing financial resources, including from funding mechanisms focused on supporting cooperative, regional and basin-scale development.

Global conventions such as the Water Convention might be useful in that regard. Mr. Raúl Muñoz Castillo, Senior Water Specialist, Inter-American Development Bank, highlighted that, from an international financial institution perspective, the publication shed light on key aspects needed to de-risk transboundary investments for water and associated sectors (nexus investments) by showcasing how improving institutional conditions for transboundary cooperation catalysed opportunities for safer and more attractive investment, not only for public funding or multilateral development banks, but also for the private sector and capital markets. In his view, the Water Convention offered an alternative framework to support riparian countries not only to improve their cooperation towards more sustainable and resilient water management, but also by offering a more solid base upon which to jointly identify investments and attract funding sources.

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