Enhancing nature finance in the water industry
Amidst calls to massively upscale finance for nature, it is easy for meaning to get lost behind numbers and the mobilisation of finance to be prioritised over on-the-ground impacts. Estimating financial flows for nature is hard, leading to an increasing focus on more easily quantified mechanisms such as markets. However, this can result in important sources of funding for nature to be overlooked.
Our previous work highlighted the water industry national environment programme (WINEP), which sets out the actions the water industry need to take to meet their environmental requirements, and is amongst the largest flows of environmental finance in England, despite the fact most people have never heard of it, at approximately £4bn per year. Understanding how to consider WINEP and other similar programmes is complex, as many of the actions are required in order to prevent, remediate, or compensate for environmental harm done by the water industry and must be considered within this context.
A new policy brief, written by Alice Stuart and Justin Adams and funded through an Agile Initiative Science to Policy grant, aims to begin demystifying WINEP as a source of nature finance, and discuss the questions that need to be answered for it to reach its full potential for nature and communities.
What is being done?
As might be expected, over 90% of WINEP actions relate to monitoring, investigating, preventing declines in, or improving water quality. The majority of this action is driven by the Environment Act (2021). Other actions address water resources (the amount of water available in rivers), driven primarily by the Water Environment Regulations (2017), and the natural environment, driven by a range of habitat and wildlife legislations.
How much of WINEP is for nature?
This is a surprisingly difficult question, as where water quality is a driver of ecological decline in a river, a grey infrastructural solution to improve it may do more than more direct restoration activities, meaning the line where actions become for nature is blurred. We used the Multilateral Development Bank’s nature finance taxonomy and found approximately 62% of actions to fall into one of the below categories:
a) Restoration and conservation of biodiversity and ecosystem services – approximately 250 actions, many of which are focused on working with communities to restore landscapes and habitats to improve water quality and water retention.
b) Reduction of the direct drivers of biodiversity loss – approximately 3,500 actions focused primarily on water quality where ecology or the environment was listed as a reason for improvement.
c) Integrating Nature-based Solutions (NbS) – approximately 750 actions that use green solutions which aren’t intrinsically good for biodiversity, such as sustainable drainage systems and water treatment wetlands, for non-ecological improvements such as to bathing water quality.
d) Design and implementation of policy, tools, or other sectoral instruments enabling (a) to (c) – approximately 7,000 actions consisting of water quality monitoring, and feasibility and optioneering studies for actions in the next asset management period.
Why does this matter?
Due to its scale, the way WINEP treats nature has substantial potential impact for nature outcomes in England. This is true not only for the economic scale, but also the spatial scale: water companies cover multiple catchments allowing integrated and landscape-scale actions that might not be possible for smaller organisations without support. In this way, it is encouraging to see a push to have nature more deeply integrated within WINEP including through the Mainstreaming Nature-based Solutions programme funded by the Ofwat Innovation Fund. It is becoming more common to look at catchment and community-based actions as a means of driving water quality improvements, thus providing wider benefit whilst meeting regulatory requirements. Whilst we recognise this approach is not always appropriate, with improvements to grey infrastructure remaining highly necessary in many cases, we push for continued integration of biodiversity beyond regulatory requirements.
How can greater integration of nature into WINEP be achieved?
Before answering the question of how better outcomes can be achieved, it is first important to commend the progress that has already been made. Existing and upcoming programmes such as Upstream Thinking, Smarter Water Catchments, and Headstart are taking a more integrated approach to river health, looking at how catchment-based interventions and habitat restoration might allow faster and more effective environmental improvements. Further progress will require work to better enable collaborative working, both between departments of water companies and outside organisations and communities. Further, it is essential that evaluation of solutions takes a long-term view of the potential benefits of landscape-scale approaches whilst still ensuring short-term harms are properly addressed.
Water industry environmental spending has the potential to act as an anchor flow for broader catchment investment, empowering communities and catchment partnerships to restore their local areas. The upcoming overhaul of water industry regulation allows the potential for changes to be made that promote catchment nature-based solutions where they are an effective approach to addressing environmental harms.
Find out more
Read the policy brief: Nature Finance within the Water Industry National Environment Programme (WINEP)
This work was carried out as part of the CBA Sir Evelyn de Rothschild Fellowship for Reimagining Nature Finance and Inclusive Capitalism
This research was supported by the Agile Initiative at the Oxford Martin School and the Natural Environment Research Council as part of the Changing the Environment Programme (NERC grant reference number NE/W004976/1)
Photo: Nick Fewings/Unsplash
