#PSDMatters – Water: Private Sector Solutions

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Today’s rising populations and growing economies are demanding more and more water. But supply is limited, putting serious pressure on already-strained resources—a dangerous trend that will only intensify in the coming decades.

If today’s collision course continues, a third of the world’s population will face serious water scarcity by 2030.

It is an issue with major implications for political stability and the future of industries whose value chains are vulnerable to water shortages. Today’s “business-as-usual” strategies will not be enough to close the water gap. In many cases, they have serious risks of fossil reserves being depleted, water reserved for environmental needs being drained, and some demand simply going unmet. This makes improving the efficiency of water use—and pricing it right—an urgent global priority.

Working alongside government, civil society, and other stakeholders, the private sector can provide complementary knowledge, experience, insights, and convening power to address critical issues of water resource management. Within its larger global infrastructure practice, IFC helps shape thinking in this area and extend the reach of clients with cutting edge models of profitable and sustainable water resource management. The focus in on expanding the impact of their proven approaches to:

  • Building agricultural productivity with micro-irrigation, improved drainage, and other technologies
  • Increasing efficiency in industrial and municipal water treatment and supply systems, generating costs savings that free up fresh water for other uses
  • Investing in sustainable water business opportunities through financial intermediaries, a growing business in the larger field of sustainable finance

At the annual World Economic Forum (WEF) in Davos, Switzerland in January, IFC took part in the launch of the 2030 Water Resources Group (WRG). A neutral, multi-stakeholder body, it is helping governments conserve their water resources in ways that will support both development and growth over the long term. Operating since 2008 as an informal thought-leader partnership with McKinsey and Co., SABMiller, WEF, and others, the group has now been formalized and based at IFC headquarters in Washington, D.C.

Water resources are fast being depleted through reckless overconsumption. This is in part because the three key user groups—agricultural, industrial, and residential—rarely interact. Political leaders often cannot get enough information to see the issue holistically, understand the extent of their problem, and choose the best policy response.

In response, the WRG has applied McKinsey’s highly regarded earlier microeconomic tool that helps policymakers choose the best ways to cut greenhouse gas emissions. A new version identifying integrated, workable solutions in water is now being applied in China, India, Jordan, Mexico, Mongolia, and South Africa.

Clear, measurable objectives are emerging that help these countries—and in time, others—set measurable objectives for success over the next two years, and acceleration from there. IFC is just one of several partner organizations whose financial support and technical expertise will help craft much-needed responses that will benefit all sides.

Editor’s Note:

This blog was first featured on the International Finance Corporation’s website and is reproduced here with permission.

Homepage image: Water being poured into tank. Ghana. Photo: © Arne Hoel/The World Bank

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