According to a recent study by McKinsey, global water infrastructure is the third largest infrastructure investment category, requiring more than $10 trillion by 2030. But defining a green bond can be challenging, and some projects that have raised finance through green bonds have been said to cause more environmental harm than benefits.
Giulio Boccaletti, Global Managing Director for Water at The Nature Conservancy, outlines three criteria that could help to determine whether an investment should be eligible for green bonds:
Establish and use protocols that evaluate projects based on objective evidence. One example is the Hydropower Sustainability Assessment Protocol, which was initially developed by the International Hydropower Association and NGOs, including The Nature Conservancy.
Integrate natural capital in the evaluation of a water investment. For example, measure the connectivity and integrity of rivers when developing a river.
Identify the complementarity of water security and ecological integrity. One example of this in action is a utility that incorporates forests in managing water supply, as has been done in Nairobi, along the Upper Tana River.