Water Asset Transition through Treating Water as a New Asset Class for Paradigm Shift for Climate–Water Resilience

Climate change is evident around the globe, which requires bold actions now to achieve UN-SDGs and Paris Agreement. The water sector is dominated by public finance and is almost subsidised. In addition, there is an increased risk perception surrounding climate investments in developing countries. Pricing climate risks is a daunting challenge for investors and the private sector, who must estimate the likelihood of various climate scenarios and their implications for physical, liability and transition risks at the firm, project, national, and regional scales. In addition, there is a building momentum to scale up global climate response. To translate this momentum into action will require significantly greater investments, investments in a different set of inclusive assets that address water security, mobilise the private sector and provides sector-based or economy-wide co-benefits to direct and indirect beneficiaries, e.g., job creation, health benefits, improved resilience and scaling knowledge and harmonise data and methodologies. Notably, climate–water finance is facing a dual challenge. It will have to both reduce the present water infrastructure financing gap and ensure that this new infrastructure/asset is low-carbon, resilient to climate change, and meets the goals of the UNFCCC and the Paris Agreement. Therefore, there is a need for a paradigm shift in the way how water asset is defined, developed, and financed. This paper presents this novel approach concept and its content and financial structure that enable treating water as a new asset class to enable private sector investment and ensure providing water for domestic, municipal, and industrial purposes and allows municipalities to scale their water reuse, sanitation, and desalination projects in partnership with the private sector and/or governments. It is increasingly important to treat water as a new asset class, particularly as nations around the world (particularly developing countries) are set to experience an anticipated 40% shortfall in water by 2030 due to climate change, economic recovery and growth, population growth and resource competition. Investment in water could be one of the ways of tackling this deficit by treating water as a new asset class.