Enhancing stewardship and decision-making for sustainable water management

Decision-making components in Green Funding and Environmental Stewardship for sustainable water management

Words by Dark Matter Labs | published in EWSC Research & Insight

Empowering individuals and organisations, including the Water utilities, to act as responsible stewards. Illustration by Arup for the EWSC project.

Key Takeaways:

This article discusses the importance of whole-life assets in Integrated Water Management (IWM) and highlights key approaches for enhancing decision-making in funding initiatives to support IWM effectively focusing on:

• Prioritising stewardship in funding initiatives and empowering responsible stewards for integrated water management leads to sustainable water resource governance, benefiting the environment and communities dependent on these vital resources.
• Promoting knowledge sharing among decision-makers and water management professionals enhances integrated water management by fostering a holistic approach to address water-related challenges, ensuring more sustainable and resilient water resource management.
• Fostering collaborative governance with diverse stakeholders enhances integrated water management by promoting collective decision-making, addressing diverse perspectives, and considering social, economic, and environmental aspects. This bridges the gap between private water companies, regulatory bodies, local communities, and environmental agencies for a sustainable approach in privatised systems.
• Emphasising a long-term perspective, including the increased use of green infrastructure, and securing sustainable financing for both grey and blue/green infrastructure projects and water management initiatives to ensure stable and reliable resources for their long-term development and maintenance.

1. Introduction: The Current approach to financing Water Infrastructure

The financialization of the water sector in England refers to the growing impact and participation of financial markets, institutions, and practices in the management and governance of water resources. Notably, it entails the utilisation of financial instruments and mechanisms, such as securitisation, to raise capital and effectively manage financial risks associated with water infrastructure projects.

Water services are susceptible to financialization due to the stable and predictable demand for water, making it an attractive long-term investment for financial markets. The substantial capital investments required for water infrastructure projects and the regulatory environment favouring private financing also contribute to financial sector involvement. However, this trend raises concerns about structural short-term cycles asynchronous with long-term infrastructure maintenance and prioritising financial gains over sustainable water management. Balancing financial interests with community and environmental needs is crucial for effectively managing water services (see Thames Water Crisis and South East Water).

There is growing recognition of the necessity to secure sustainable funding and adopt adaptive strategies (Hedger et al., 2006; Mell, 2018). These implications extend to the financing of water infrastructure and the management of water resources. The lack of reinvestment in water infrastructure due a system that prioritises paying dividends may impede effective risk management efforts, posing challenges in maintaining and upgrading the system (Hall, 2021).

To ensure long-term sustainability, it is vital to strike a balance between paying dividends and the resilience of water resources. Adequate funding and resource allocation are essential for addressing and mitigating risks like floods and droughts, ensuring the overall effectiveness of sustainable water management.

2. Context: Framing challenges and discovering opportunities

Integrated Water Resources Management (IWRM) is a cross-sectoral policy approach coordinating water, land, and related resources for economic and social welfare while preserving ecosystems. Shifting IWM financing involves innovative mechanisms, diversifying sources, and aligning incentives for long-term resilience and collaboration.

2.1 Investment needs along the infrastructure life cycle

To effectively manage and sustain water infrastructure throughout the life cycle of assets is crucial (Machete & Marques, 2021). Once assets are operational, ongoing investment is necessary in areas such as:

• Monitoring systems and maintenance programs, while typically considered operational spending, their strategic implementation, and long-term benefits can justify viewing them as investments that improve the overall performance and value of water management and infrastructure systems.
• Investing in a skilled workforce is essential for the water sector’s long-term performance and sustainability, enabling informed decisions and meeting future challenges confidently. The commitment to building expertise ensures operational efficiency and resource optimisation for a thriving and resilient future.
• Investment in asset rehabilitation and replacement investment to address water quality and quantity declines as assets age and deteriorate;
• Increased resilience measures to mitigate water disasters caused by floods, pollution, and climate change.

Diminished infrastructure capabilities and investments have detrimental effects on water assets throughout their life cycle. It is crucial to actively consider the aging and insufficiency of water systems during the planning and design stage to mitigate this. This requires prioritising asset selection, conducting feasibility studies, and utilising engineering design expertise. By taking these proactive measures, we can effectively address the challenges and better prepare for and mitigate potential risks.

2.2 Investment gaps in water management

Funding schemes need to consider the different stages of an asset’s life cycle and related specific requirements. In England, Asset Management Plan cycles (AMP) structure funding and investment for water assets. These cycles, spanning five years, establish investment priorities, set performance targets, and allocate financial resources. Additional support may be obtained through government grants and borrowing, influencing decisions on allocating funds for managing and improving water resources (Ofwat, 2020).

Despite the increasing need for infrastructure improvements due to extreme weather conditions and rapid deterioration, the current funding needs to expand regarding the funding cycle and investment scale; several factors contribute to the current funding constraints and hinder necessary improvements (Vinagre et al., 2023):

• Aging Infrastructure: Much of the water infrastructure in England is aging and in need of repair or replacement. However, the high cost of such projects and the lack of adequate funding can lead to investment gaps
• Financial Constraints: Water companies in England may face financial constraints that limit their ability to invest in infrastructure. This could be due to limited revenue from customer bills or restrictions on borrowing.
• Regulatory Environment: The regulatory environment for water companies may not incentivise or support sufficient investment in infrastructure. Companies may prioritise short-term financial goals over long-term infrastructure improvements.
• Funding Allocation: The allocation of funds for water infrastructure projects may not always align with the most critical needs. This can result in gaps in investment for essential infrastructure upgrades.
• Uncertainty and Risk: Uncertainty about future water demand, climate change impacts, and other risks can lead to cautious investment decisions or delays in funding crucial projects.

The focus of funding should be on asset maintenance, upgrades, and developing new infrastructure to enable growth and ensure compliance, enhance service quality, and achieve long-term sustainability goals. However, a recognised need exists to change the approach to address these challenges and overcome the funding shortfall adequately (Ofwat, 2019). To address challenges in water infrastructure, a multifaceted approach is essential that can include:

• Diversify Funding Sources: Explore alternative funding options like public-private partnerships, green bonds, and impact investing to attract more water-project capital.
• Long-Term Financial Planning, Asset Management, and Climate Resilience: Develop comprehensive, proactive asset management strategies that prioritise maintenance, upgrades, and developing new infrastructure to enable growth, ensure compliance, enhance service quality, and achieve long-term sustainability goals.
• Improved Regulation: Strengthen regulatory frameworks to encourage efficient water use, reduce leakage, enforce environmental standards, and incentivise the funding focus on asset maintenance and upgrades.
• Collaboration and Partnerships: Foster collaboration among government agencies, water utilities, private investors, and communities to pool resources and expertise for infrastructure projects.
• Public Awareness and Participation: Involve the public in decision-making to promote understanding, garner support, and ensure accountability for sustainable water management.
• Research, Innovation, and Government Support: Stress investing in research and innovation to develop better technology and asset management practices. Encourage government support through grants and subsidies to bridge the funding gap and support water infrastructure projects.

Addressing the investment gaps in water infrastructure in England requires innovative and forward-thinking approaches. One promising solution lies in incorporating more green and blue infrastructure into planning and funding strategies. By doing so, we can not only bridge the financial disparities but also achieve sustainable, resilient, and cost-effective solutions to water challenges.

2.3 Investment Approaches for Green Infrastructure

Green infrastructure offers a complementary approach to integrated water management with a long-term perspective. Unlike traditional grey infrastructure like pipes and treatment plants, green infrastructure leverages nature-based solutions to manage water resources sustainably. Green infrastructure requires ongoing maintenance after the implementation and takes time to reach its full functional capacity. However, once it matures, it can operate effectively over the long-term, ensuring its longevity and continued benefits (e.g. Cator Park, Kidbrooke Village). The services enabled by green infrastructure extends beyond a single function, encompassing various functions. Further, green infrastructure has spill-over effects that benefit wider communities inclusively, creating positive impacts beyond its immediate scope. Investment in green infrastructure should incorporate these distinct characteristics of green infrastructure.

Cator Park, Kidbrooke Village | Greenwich, London, UK. Image Source: HTA, 2023.

Incorporating green infrastructure presents promising solutions, it is essential to recognise the need for new capabilities and management methods to fully realise its potential. Many local authorities and water companies might be relatively new to green infrastructure, necessitating attention to allocating budgets for operational activities and developing the necessary skills or re-skilling to oversee its maintenance effectively.
Collaborative relationships among stakeholders, such as decision-makers, regulators, and communities, are crucial in enabling funding, defining liabilities, and allocating responsibilities for green infrastructure projects. It is not enough to focus solely on design; maintenance plays a vital role in ensuring that constructed wetlands, for instance, deliver the multiple sustainable benefits they can provide, like in the case of Riparian Buffer Zones in Scotland. By carefully considering the entire life cycle of green infrastructure and integrating effective design, collaborative funding approaches, and responsible maintenance practices, we can truly harness its transformative potential in addressing the investment gaps and creating resilient, sustainable water infrastructure solutions. (For case studies see: Williams et al., 2019). This collaborative approach not only eases the burden on water companies but also fosters a more sustainable, resilient, and inclusive water management system.

2.4 Stewardship as a key opportunity in effective approach

Another critical aspect to consider is the concept of stewardship. Regarding green infrastructure and integrated water management, stewardship is crucial in ensuring the effective integration of social, technological, and institutional components in water resource governance. By delegating some stewardship responsibilities to communities and stakeholders through the adoption of green infrastructure, water companies can focus on strategic planning, infrastructure maintenance, and addressing more complex challenges (e.g. Upper Axe landscape recovery project). To be successful, this involves activities that include regular monitoring of stakeholder engagement and fostering sustainable management of resources for the benefit of present and future generations.

Active involvement of local communities in the planning and implementation of assets like green infrastructure projects is an example of prioritising stewardship. Active community engagement promotes a sense of ownership and responsibility among community members, leading to effective long-term asset management (e.g. Green infrastructure at King’s Cross). By actively involving local communities, decision-makers can ensure that the broad scope of values and outcomes expected, including social, environmental, and economic, from these projects, are achieved and sustained over time (e.g. Dartmoor Headwaters Project and the Eddington Project). By strongly emphasising stewardship within green funding initiatives, the allocation for Integrated Water Management (IWM) can facilitate a comprehensive and holistic approach.

Dartmoor Headwaters Natural Flood Management Project: Rangers installing leaky dams into a network of old tin mining gullies, many of which channel significant flows during heavy rainfall. Image Source: Dartmoor Headwaters, 2023.

2.5 Identifying required conditions to leverage Integrated Water Management

Identifying factors and shifting approaches in Integrated Water Resources Management (IWM) is crucial for enhancing problem-solving, allocating resources effectively, building resilience, and maximising funding utilisation. This enables us to address challenges more efficiently and achieve sustainable outcomes in water management.

It is also vital to recognise that sustainable approaches unlock synergistic benefits and that these nature-based solutions and grey infrastructure help optimise water systems’ overall performance and resilience.

To effectively leverage funding towards IWM, several approaches need to be shifted:

• Managing assets with different life cycles could improve resource allocation, prioritisation, and coordination.
• Asset management strategies must consider the overall asset portfolio, and balance investment decisions, as assets constructed at other times may have varying aging rates and maintenance requirements, leading to misalignments;
• Develop long-term plans that account for interdependencies and potential risks associated with misaligned asset life cycles.

The upcoming section will explore an existing practice demonstrating collaborative initiatives’ power in addressing water-related issues and developing sustainable solutions. This practice enables a collective approach to tackling water challenges by fostering the involvement of stakeholders from diverse sectors. Moreover, utilising innovative financial mechanisms has successfully protected critical water sources. These collaborative efforts ensure water systems’ long-term viability and resilience, safeguarding their health and sustainability.

Water pipeline maintenance in the ground. Photo by Selim Arda Eryilmaz. Image Source: Unsplash.

3. Case Study: Greener Grangetown: Sustainable Urban Water Management

Green Infrastructure promotes decentralised systems that work with nature, providing multiple benefits while minimising negative environmental impacts. However, financing and managing green infrastructure requires us to take a long-term view. Community-led green infrastructure projects provide a promising pathway to overcome financial barriers and secure sustainable funding for environmental initiatives. By involving citizens in the process, policymakers can harness public support, advance pro-environmental attitudes, and build trust in the government, ultimately driving the successful implementation of green infrastructure projects that benefit both communities and the environment.

One example of success funding green infrastructure projects is the Greener Grangetown. The project aimed to address the challenge of surface water entering Dŵr Cymru Welsh Water’s combined sewer network, covering 12 Victorian streets and 550 properties in the Grangetown ward.

Partnership for Wider Benefits: The project resulted from a collaborative effort between Cardiff Council, Dŵr Cymru Welsh Water, and Natural Resources Wales. This partnership allowed the broader benefits of the project to be identified and maximised. These organisations came together to address the challenge of surface water management in the area, with the aim of reducing operational costs, providing resilience against the impacts of climate change, and enhancing the overall environment and quality of life in Grangetown.

Feasibility Study and Monetisation: A feasibility study revealed that the project could transform the public realm, environment, and transport infrastructure and played a crucial role in securing funding as it identified and monetised the benefits for each partnering organisation. The project offers a cost-effective approach due to its collaborative nature. Funding is pooled from multiple organisations (City of Cardiff Council, Dŵr Cymru Welsh Water, Natural Resources Wales, Arup, and GreenBlue), allowing for the achievement of multiple benefits through combined investments.

Challenges: The existing infrastructure increased operational costs for the water company, requiring surface water to be pumped over 8 miles before treatment and discharge into the Severn Estuary. With the impacts of climate change and urbanisation, a resilient solution was essential.

The Solution and Role of Stewardship: Greener Grangetown utilised green infrastructure to manage surface runoff closer to its source. The project demonstrated stewardship by responsibly retrofitting features into the urban landscape.

Benefits: The project reduced operational costs for Dŵr Cymru Welsh Water and enhanced the drainage system’s resilience to climate change impacts. The intervention provided extra capacity in the combined sewer system, mitigating the risk of flooding during heavy rainfall events. Moreover, the transformational approach created a greener and environmentally friendly urban space, promoting biodiversity and improving the area’s overall appeal.

Conclusion: Greener Grangetown exemplifies how long-term stewardship from the involvement of multiple organisations is crucial in implementing resilient urban water management solutions. The project achieved multiple benefits by responsibly managing surface water runoff incorporating green infrastructure and considering the long-term well-being of the urban environment. This case study is a model for sustainable urban water management initiatives that align with responsible stewardship principles, resulting in cost savings, increased resilience, and a more environmentally friendly urban landscape.

Greener Grangetown School Planting Event. Image Source: Green and Blue, 2023.

4. Pathway forward: Green Funding and Environmental Stewardship for Sustainable Water Management

Prioritising stewardship in funding initiatives and decision-makers can ensure green funding initiatives’ success and positive environmental impact; this entails adopting a holistic approach considering water systems’ social, institutional and technical dimensions. Regular monitoring, data collection, and stakeholder engagement enable local communities to understand water asset conditions better and address issues promptly, fostering a sense of ownership and responsibility. By actively involving local communities, rethinking investment needs and spending, and implementing regular monitoring, we can achieve long-term environmental sustainability, enhance community resilience, and foster a sense of shared responsibility in managing our valuable water assets. The Catchment Based Approach is an exemplary model for collaborative water management in England, with its river catchment partnerships demonstrating successful diversification, project delivery, and leveraging of funding from non-Government sources (Collins et al., 2020).

We further elaborate on prioritising stewardship in funding initiatives for integrated water management by suggesting embracing the following actions that promote responsible and sustainable natural resource management, benefiting communities, stakeholders, and the environment in the long term. While the suggested actions prioritise stewardship in funding initiatives for integrated water management, we acknowledge the complexity in practice, especially concerning regulatory considerations for local authorities and water companies. Collaborative decision-making and governance structures may require additional efforts to accommodate various perspectives and meet regulatory obligations effectively. (Lamond & Everett, 2019).

(1) Prioritise Stewardship in Funding Initiatives:

• Engage local authorities, government agencies, environmental agencies, and communities in discussions to prioritise funding initiatives that embrace stewardship principles in integrated water management.
• Collaborate with stakeholders to develop funding criteria prioritising long-term environmental sustainability, community resilience, and responsible water asset management.

(2) Adopt a Holistic Decision-Making Approach:

• Facilitate collaborative decision-making processes involving stakeholders from local authorities, government agencies, environmental agencies, communities, and water management professionals.
• Ensure that funding decisions consider integrated water management’s social, economic, and environmental aspects, accounting for stakeholder engagement, ecological impacts, and water system resilience.

(3) Establish a Collaborative Governance Structure:

• Engage local authorities, government agencies, environmental agencies, communities, and regulatory bodies such as Ofwat in forming a collaborative governance structure.
• Foster open dialogue, active participation, and shared decision-making to address diverse perspectives and find common ground in supporting sustainable water management.

(4) Implement Robust Evaluation and Monitoring Systems:

• Engage stakeholders in designing and implementing robust evaluation and monitoring systems for funded projects, including local authorities, environmental agencies, and communities.
• Foster collaboration to establish data collection mechanisms that provide insights into project effectiveness, environmental impact, and stakeholder satisfaction.

(5) Encourage Knowledge Sharing and Best Practices:

• Establish platforms for knowledge sharing and the exchange of best practices among decision-makers, water management professionals, and stakeholders.
• Involve local authorities, government agencies, environmental agencies, communities, and water management experts in sharing success stories, lessons learned, and innovative approaches to foster continuous learning and informed decision-making.

(6) Explore Alternative Financing Mechanisms:

• Collaborate with stakeholders, including local authorities, government agencies, and financial institutions, to explore and implement alternative financing mechanisms that support integrated water management.
• Engage stakeholders in discussions on innovative approaches such as green bonds, public-private partnerships, and impact investing to attract funding for projects aligned with stewardship principles.

Ultimately, this approach aims to empower individuals and organisations, including the Water utilities, to act as responsible stewards by participating in a water fund or trust and committing to long-term environmental sustainability.

At the nature reserve Hahnenmoor, a large bog area in Lower Saxony, Germany. Photo by J.-H. Janßen, 2016. Image Source: Wikimedia Commons, 2023.

This article is written by Dark Matter Labs (DLM). DLM contributed towards developing a transition model pathway, given its experience in building and orchestrating systemic transitions. This article is one of five produced by DML, see: How to implement and benefit from a multi-value flow in local communities, Mitigating water-related risks through local stewardship, Essential frameworks for the sustainable development of common goods, and Mitigating water-related risks through integrated asset management for more.

As Discovery research lead and series editor, Arup’s Transformation & Design Studio led the multi-partner research effort contributing public innovation and strategic design expertise.

This is one of a series of insight articles produced as part of the EWSC innovation programme, exploring how integrated water management can be delivered through innovative housing and stewardship models. For an overview of the project, latest news or to get in touch visit https://www.ewsc.org.uk/.