Bapon (SHM) Fakhruddin, PhD

The reality of extreme weather and climate risk

Over the past ten years, there have been close to 4,000 extreme weather events linked to climate change around the globe, resulting in nearly $2 trillion in economic losses. These events affect our communities and economies exceptionally. In 2022 and 2023 alone, the damages amounted to $451 billion, marking a 19% rise compared to earlier years. This figure is more than just a number; it highlights the urgent need for climate action. A striking example is Hurricane Maria in 2017, which devastated Dominica, leading to losses exceeding 300% of the country’s annual economic output, illustrating how a single event can severely impact a nation.

The global water crisis is worsening, with nearly 3 billion people and more than half of the world’s food production now in areas where total water storage is projected to decline. Where irrigation is prevalent, its drying impact overwhelms that of climate change. In some areas, the influence of irrigation on the drying trend is more than twice as strong as the climate effect.

The importance of water security and its value

Amid these challenges, water stands out as a vital focus. It’s essential for life, economies, health, ecosystem, food security, energy and sustainable development. Yet, we cannot provide universal access to safe water and sanitation by 2030. We need to significantly increase our efforts, aiming for an annual investment of between $131 and $141 billion. Putting money into water security management is not just about protecting the environment; it’s essential for our economy. Effective water management can enhance agriculture, help manage droughts and floods, support various industries, and promote public health. In areas like East Asia, where 1.3 billion people are dealing with extreme heat, robust water systems can alleviate suffering and minimize economic losses.

The economic case for action

Investing in water goes beyond disaster response. Extreme weather already causes significant economic losses, but these figures likely underestimate the actual impact. Investing in water infrastructure can prevent economic downturns, reduce disaster relief costs, and promote equitable access to services, fostering inclusive growth.

A Call to Action: Mobilizing trillions

COP29, known as “The Finance COP,” focuses on the financial commitments needed to tackle climate change. While global investments in climate solutions have exceeded $1 trillion annually since 2021, we need at least five times more. We must leverage our global financial system, with governments, private investors, and international institutions collaborating to create robust climate finance packages prioritizing water investments. Innovative financing, like public-private partnerships and carbon pricing, can unlock necessary capital.

Water: The Connector and Catalyst

Water connects all sectors, from energy to health, making it crucial for achieving Sustainable Development Goals. Investing in water supports other goals like poverty eradication and gender equality. By ensuring equitable access to water, we empower communities and foster resilient economies.

Role of Green Climate Fund (GCF)

The GCF plays a crucial role in managing water security through blended finance, which combines public and private investment to address the multifaceted challenges of water management. Water is not just a resource; it is a vital connector that underpins all aspects of life and development, influencing everything from agriculture and energy to health and education. Despite its critical importance, the world faces a severe water crisis, with significant implications for achieving global development goals.

The GCF is essential in this context because it provides the financial resources needed to implement innovative solutions for water management. By leveraging blended finance, the GCF can mobilize additional funding from private investors, thereby increasing the overall investment in water infrastructure and management. This approach not only helps to bridge the significant financial gaps in the water sector but also ensures that investments are directed towards sustainable and equitable solutions.

Blended finance through the GCF enables the implementation of projects that improve water efficiency, enhance water quality, and ensure equitable access to water resources. These projects are critical for achieving the United Nations’ Sustainable Development Goal 6, which aims to ensure availability and sustainable management of water and sanitation for all. Moreover, by addressing water security, the GCF also contributes to other development goals, including poverty eradication, zero hunger, good health and well-being, and gender equality.

Time for action is now

As we gather in Baku for #COP29, let’s be guided by the realities we face and the economic imperatives that compel us to act. We have the knowledge, technology, and financial tools to address these challenges. What we need is the collective will to act urgently and decisively. We must launch a revolution in sustainable water management and investment. This includes:

1. Dramatically improving water productivity in agriculture while meeting growing food needs. We should aim to reduce agricultural water usage by a third while increasing crop yields.
2. Conserving and restoring natural habitats critical to protect green water – the moisture in our soils and vegetation. This is crucial for rainfall patterns and carbon sequestration.
3. Establishing a circular water economy, including industrial water reuse. We should aim to recycle 50% of water to enable every drop of used water to generate a new drop.
4. Enabling clean energy and AI development with much lower water intensity and consider water as an asset class.
5. Ensuring no child dies from unsafe water by 2030, by securing reliable supply of potable water and sanitation for underserved communities.

Achieving these water-related goals will require innovative financing approaches. We must establish partnerships to ensure larger and more reliable financing of water in low and lower-middle income countries. These partnerships should make bold use of instruments like first-loss guarantees, concessional finance, and co-investment arrangements to catalyze private investments.

The costs of inaction on water are staggering. High-income countries could see their GDPs shrink by 8% by 2050 on average, while lower-income countries could face even steeper declines of 10-15%. We must act now to avoid this future.