Water finance pipe is full of recycled pledges
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to change dateline.
By Antony Currie
NEW YORK, March 28 (Reuters Breakingviews) -Few enjoy being packed like sardines in a windowless conference room in the bowels of the United Nations. But for the financially-straitened water industry, the prospect of being inundated with cash was more than enough. So full was the chamber last Wednesday that Patrick Decker, CEO of $18 billion Xylem XYL.N, had to shove his way to his seat. Attendees squeezed aside because Decker leads a 17-institution coalition which earlier that day committed to spend $11 billion over the next five years on water innovation. Unfortunately his pledge, and those made by others at the three-day UN Water Conference, is uninspiring.
By close of play on Friday the event had solicited 708 pledges. In many cases they amounted to glorified marketing statements or vague promises of collective action. Some promised to invest, with the combined total coming to some $300 billion.
The biggest single promise of cash came from the U.S. government, which announced $49 billion of funding. Yet the biggest slug, $43 billion, was part of the U.S. Infrastructure Investment and Jobs Act passed in late 2021. Most of the rest were recycled from earlier announcements, too.
Xylem’s 17-member alliance, which includes French giant Veolia VIE.PA, took a similar tack. They had simply totted up what they already plan to splash out, as part of their regular operations, on research and development, investments, capital expenditure and the like. Their $11 billion sum also is hardly huge, equating to just under 8% of leading participants’ combined revenue by the end of 2027, per Refinitiv data and Breakingviews estimates.
Others were not quite so bold with their promotion. But companies like Anglo American AAL.L and Finnish pulp and paper company Stora Enso Oyj STERV.HE also highlighted their previous investments and actions rather than devising fresh commitments.
After analysing the first 400 submissions, the World Resources Institute noted that around a quarter were good, but small, and for the most part “not strong enough to lead to substantial change”. The main standout came later when Bayer BAYGn.DE unveiled a new push to factor water into all its investment and business decisions and slash the amount used in rice production by 25%.
There’s nothing wrong with showcasing accomplishments. Overstatements, however, can smell of greenwash. They can also undermine the drive to find the $1 trillion a year needed, per the World Resources Institute, to ensure global water security. There’s plenty of opportunity to make money – some $436 billion-worth, according to enterprises surveyed by nonprofit CDP. Companies may be able to finance themselves with their own cashflow somewhat, but the ability to tap banks and financial markets will be key. Yet major Wall Street lenders were noticeably absent from the confab.
Reusing water is good conservation. Recycling investment pledges only muddies the financial stream. The conference’s lack of ambition highlights an incentive problem; unlike with carbon emissions, there’s little outside pressure for the water industry to get aggressive; submissions, after all, are voluntary. “We were given a mandate for a conference without a mandate,” said outgoing Dutch water envoy Henk Ovink. It’s time to add pressure to the water financing pipeline.
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The UN Water Conference, the first held since 1977, closed on March 24 with more than 700 pledges from member states, companies, non-governmental organisations and other outfits to increase efforts to improve water security. The promises included investment and spending worth some $300 billion.
On March 22 Xylem led a 17-member coalition of companies, investment firms and non-government organisations in pledging to spend $11 billion over the next five years on water innovation. The entities involved are Acciona, Autodesk, BlueTech Research, Burnt Island Ventures, The Coca-Cola Foundation, Evoqua, Grundfos, Hansgrohe, Hydraloop, Idexx, UGSI Solutions, Veolia, Water Foundry Ventures, Wavin, Westly Group, XPV Partners and Xylem.
Also on March 22, the U.S. government said it was committing $49 billion to “equitable access and climate-resilient water and sanitation infrastructure”.
Editing by Pete Sweeney and Thomas Shum
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