Water financing gap constrains global growth ambitions

Water scarcity and insufficient funding have emerged as significant obstacles to technological advancements, energy systems, food production, and urban development, prompting governments and investors to prioritize the mobilization of greater resources for water infrastructure. This concern gained prominence during a recent gathering of approximately 50 executives, investors, and philanthropists at the UAE's Permanent Mission to the United Nations in New York.

The event, titled "Unlocking Water Investments, Unlocks Growth," aimed to explore strategies for transforming viable water projects from concept to financial closure. The roundtable, organized by Badr Jafar, the UAE's Special Envoy for Business and Philanthropy, and Abdulla Balalaa, the Assistant Minister of Foreign Affairs for Energy and Sustainability, took place ahead of the 2026 UN Water Conference, scheduled to be co-hosted by the UAE and Senegal in Abu Dhabi from December 8 to 10.

Baldala emphasized that water is increasingly becoming a critical factor for growth, competitiveness, and resilience, directly impacting artificial intelligence, energy transitions, food security, and urban development. He highlighted that expanding technology and energy systems rely heavily on dependable water resources and supporting infrastructure.

Jafar underscored the financing challenge, stating that water serves as the "infrastructure beneath every other infrastructure," including food, energy, cities, and data centers. He noted that while viable solutions exist, weak project preparation, risk allocation, and a shortage of patient capital continue to hinder many projects from attaining fundability.

According to World Bank data, developing countries allocate around $164.6 billion annually to water, accounting for approximately 0.5% of their combined gross domestic product. Of this spending, about 91% comes from governments and state-owned enterprises, while less than 2% is sourced from private entities. The World Bank estimates that annual spending on water supply and sanitation in developing countries must increase by between $131.4 billion and $140.8 billion to achieve universal access targets.

This would necessitate investment levels nearly three times current rates in the countries assessed, with the most significant gaps occurring in Sub-Saharan Africa and South Asia. The financing shortfall is becoming increasingly critical as demand rises across industries. Data centers supporting artificial intelligence necessitate substantial water consumption for cooling purposes, both directly and indirectly through electricity generation.

Power systems also depend on water for thermal generation, hydropower, cooling, fuel production, and certain aspects of the renewable-energy supply chain. Agriculture remains the primary user of freshwater globally, making water availability essential for food security, while rapid urbanization intensifies the pressure on storage, treatment, distribution, and wastewater systems.

Climate change exacerbates these challenges by altering precipitation patterns, worsening droughts in certain regions, and heightening flood risks in others. United Nations data reveal that in 2024, 2.2 billion people lacked access to safely managed drinking water, and 3.4 billion lacked access to safely managed sanitation. The UN asserts that global progress remains insufficient to attain Sustainable Development Goal 6, which aims to ensure universal access to safe water and sanitation and sustainable management of water resources by 2030.

Financing constraints are merely one aspect of the problem. Water projects can be challenging to structure for commercial investors due to tariffs often failing to recover costs, uncertain revenue streams, and varying regulatory frameworks across markets. Currency risk, lengthy payback periods, and weak utility balance sheets further limit private capital access.

During the New York meeting, participants discussed potential solutions to these obstacles, such as enhancing project preparation, establishing clearer offtake arrangements, offering guarantees, utilizing local-currency financing, and implementing blended structures combining public, private, and philanthropic capital. They also explored avenues for first-loss and catalytic funding to make projects bankable before attracting fully commercial investments.

The roundtable also evaluated water reuse, leakage reduction, storage, desalination, and digital monitoring as areas where established technologies could yield measurable improvements when combined with effective governance and capable local operators.