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Sink or Swim: a Multi-Sector Collaboration on Water Asset Investment

June 03, 2014 |

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Water as an economically strategic resource and a core element of natural capital underpins many business activities. Ensuring that water is carefully stewarded and available in sufficient quantity and quality is a subject of vital interest to business.

In the UK, the availability of upstream water resources is being affected by population growth and climate change. This is creating water stress and risks for businesses both now and in the future. To provide greater resilience to water scarcity, more innovative investments are required in water supply.

The current financing and regulatory channels in England and Wales for water infrastructure investment focus on a single-sector approach and are not designed to consider multi-sector investments. It is not water companies alone that should shoulder the burden, since water risks affect multiple sectors. There is therefore a need for a multi-sector approach to innovate financing models which considers different ways of using the existing and new finance channels to address the water asset investment challenges in the UK.

The Approach

This ‘Sink or Swim’ Collaboratory brought together different stakeholders to consider new partnerships that would achieve longterm resilience to water scarcity across multiple sectors. The implementation of multi-sector catchment based initiatives will provide businesses with the capacity to secure water supply during long-term droughts and significantly reduces associated business risks. It would also enable a more integrated planning and financing approach towards water investment and management.

This Collaboratory worked with nine companies across six sectors: finance, agriculture, retail, civil engineering, real estate providers and the water sector to explore novel financing models for a multisector catchment-based water asset investment and management approach. To ground the analysis and financing solutions that were developed, CISL and participating companies used a case study: a proposed water storage investment in the Wissey catchment. The Wissey catchment is located in the East of England which is the driest and one of the fastest growing economic regions in UK. It was also one of the pilot catchments for Defra’s catchment based approach.

To understand the motivation and business case for various sectors to be involved in the Wissey project, the Collaboratory identified the value of water to businesses embedded in the complex web of commercial relationships. It further analysed the business case for each sector by considering the potential income streams and finance streams that can be derived from or contribute to the water storage investment. The income streams were extracted by considering the benefits of a water investment to each business; the potential finance streams were explored based on the commercial and contractual relationships in the value chain.

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