OECD Studies on Water Making Blended Finance Work for Water and Sanitation Unlocking Commercial Finance for Sdg 6

Description

Investments in water and sanitation are a prerequisite to deliver on the Sustainable Development Goals (SDGs), in particular on SDG 6 ensuring availability and sustainable management of water and sanitation for all. Blended finance can play an important role in strategically investing development finance to mobilise additional commercial finance needed to fill the current investment gaps. Thus far, however, blended finance has not reached scale in the water and sanitation sector. A greater evidence base is needed to better understand the current applications as well as the potential of blended models in the water and sanitation sector. This publication takes a commercial investment perspective and provides insights into three subsectors: (1) water and sanitation utilities, (2) small-scale off-grid sanitation and (3) multi-purpose water infrastructure and landscape-based approaches. The publication draws out recommendations for policy makers and practitioners to apply and scale innovative blended finance approaches where most appropriate. Foreword Acknowledgements Abbreviations and Acronyms Executive Summary 1 Insights from blended finance in the water and sanitation sector 1.1. Financing water to achieve the SDGs 1.1.1. Rationale 1.1.2. Approach and methods 1.2. The state of the blended finance market in water and sanitation 1.2.1. Blended finance models are emerging but have not reached scale 1.2.2. Specific investment attributes are limiting the engagement of commercial finance A lack of sustainable revenue streams is holding back commercial investments Other project attributes are preventing commercial finance at scale 1.2.3. A variety of blended finance instruments and mechanisms are already applied 1.3. The potential of blended finance for water-related investments 1.3.1. Addressing operational bottlenecks can spur the uptake of blended finance instruments and mechanisms Harness the opportunity to mobilise local commercial actors Understand business models and revenue streams across the supply chain and develop matching blended finance approaches Explore the development of a portfolio of projects to address selected unfavourable project attributes Design blended finance to build markets - and incorporate its subsequent exit Co-ordinate stakeholders for the success of blended finance models 1.3.2. Policy level considerations to make blended finance work for SDG 6 Design blended finance in conjunction with efforts to improve the enabling environment Increase transparency to make a valid business case for commercial investment Establish policy-level co-ordination and co-operation processes for blended finance References 2 Evidence on blended finance in water and sanitation utilities 2.1. An introduction to water and sanitation utilities 2.2. Investment profile: an assessment of the risks, returns and project attributes 2.3. Blended finance instruments and mechanisms for financing water and sanitation utilities 2.4. A typology of investors in water and sanitation utilities 2.5. An assessment of sustainable development impact 2.6. Subsector-specific insights References 3 Evidence on blended finance in small-scale off-grid sanitation, wastewater collection and treatment 3.1. An introduction to small-scale off-grid sanitation 3.2. Investment profile: an assessment of the risks, returns and project attributes 3.3. Blended finance instruments and mechanisms for financing small scale off-grid sanitation 3.4. A typology of investors in small-scale off-grid sanitation 3.5. An assessment of the sustainable development impact 3.6. Subsector-specific insights References 4 Evidence on blended finance in multipurpose infrastructure and landscape-based approaches 4.1. An introduction to multipurpose water infrastructure and landscape-based approaches 4.2. Investment profile: an assessment of the risks, returns and project attributes 4.3. Blended finance instruments and mechanisms for financing multipurpose water infrastructure and landscape-based approaches 4.4. A typology of investors in multipurpose infrastructure and landscape-based approaches 4.5. An assessment of the sustainable development impact 4.6. Subsector-specific insights References Annex A. Primer on blended finance A primer on blended finance for water and sanitation Blended finance in the development co-operation landscape Blended finance instruments and mechanisms Annex B. Case Studies: Water and Sanitation Utilities The Kigali Bulk Water Supply project: When a Public Private Partnership meets Blended Finance Development finance Commercial finance Challenge Solution Expected impact Jamaica’s Credit Enhancement Facility: Establishing innovative financing mechanisms for the sustainable financing of wastewater management Development Finance Commercial Finance Challenge Solution Impact Blended finance solutions to expand utilities’ services in Indonesia Development finance Commercial finance Challenge Solution Impact Blended finance solutions to support rural Filipino utility service expansion Development finance Commercial finance Challenge Solution Impact The Philippine Water Revolving Fund: bridging the rural-urban divide in access to water utility services Development finance Commercial finance Challenges Solution Impact Facilitating Access to Finance for water and sanitation infrastructure in Cambodia through blending solutions at multiple entry points Development Finance Commercial Finance Challenge Solution Impact Notes Annex C. Case Studies: Off-grid sanitation Water and Sanitation Sanitation taxes for waste treatment plants and pay-for-success in desludging Development finance Commercial finance Challenge Solution Impact Funding waste water and faecal sludge treatment and reuse in Udaipur Development finance Commercial finance Challenge Solution Original public-private partnership Second faecal sludge treatment plant planned Impact Water Credit and Water Equity: microfinance sanitation loans to expand access to sanitation in India Development finance Commercial finance Challenge Solution Impact Annex D. Case Studies: Multipurpose water infrastructure and landscape-based approaches Municipal Water Conservation, Water Demand Management and Cost Recovery Programmes in South Africa Development finance Commercial finance Challenge Solution Impact Jordan Compact - Blended finance and the expansion of the As-Samra Wastewater Treatment Plant Development finance Commercial finance Challenge Solution Impact Multipurpose Hydropower Project in Lao People’s Democratic Republic (PDR) Development finance Commercial finance Challenge Solution Impact Water funds: A financial, technical and institutional mechanism that promotes public and private sector participation for watershed conservation. Development finance Commercial finance Challenge Solution Impact Infrastructure Services and Renewables Projects - Transforming Bugala Island’s Infrastructure Development finance Commercial finance Challenge Solution Impact Improving the financial viability of the Songwe River Basin Development Programme through the use of blended finance Development finance Commercial finance Challenge Solution Impact Landscape-based blended financing approaches in the Kafue River Basin Development finance Commercial finance Challenge Solution Impact References Notes Blank Page Annex A. Primer on blended finance Annex B. Case Studies: Water and SanitationUtilities Annex C. Case Studies: Off-grid sanitation Water and Sanitation Annex D. Case Studies: Multipurpose water infrastructure and landscape-based approaches