Global Challenge Programs [left intentionally blank] 2 TABLE OF CONTENTS Why a GCP on Water? ............................................................................................................................. 7 What will the WSCA GCP do?................................................................................................................... 8 World Bank Areas of Focus .................................................................................................................. 8 Scope and Intervention Logic ............................................................................................................... 8 Box 1. Enhancing water security in FCV settings for peace and stability ............................................ 9 Pillar 1: Achieving universal access to safely managed water supply and sanitation (WSS). ................ 10 Key Areas of intervention ............................................................................................................... 10 Pillar 2: Scaling up climate-resilient irrigation (CRI) to increase food production and water productivity. ...................................................................................................................................... 11 Key Areas of intervention ............................................................................................................... 12 Pillar 3: Reducing the impacts of floods and droughts and managing water resources sustainably ..... 12 Key areas of Intervention ............................................................................................................... 13 What’s different? ........................................................................................................................... 13 How will the WSCA GCP work? .............................................................................................................. 16 World Bank Menu of Options and Implementation ............................................................................ 16 Box 2. Addressing bankability and affordability constraints with Hybrid PPPs ................................. 17 Box 3: Examples of WB replicable models and scalable projects ..................................................... 19 Partnerships and Financing ................................................................................................................ 21 Knowledge and Learning.................................................................................................................... 21 Results and Program Management .................................................................................................... 22 Measuring Results and Key Indicators ............................................................................................ 22 Box 4 Key Indicators ....................................................................................................................... 23 Operationalization ............................................................................................................................. 24 Indicative Pipeline and Next Steps ..................................................................................................... 24 Reporting .......................................................................................................................................... 25 Annex 1a: Operationalizing the One World Bank Approach.................................................................... 26 Annex 1b: Theory of change: Fast Track Water Security and Climate Adaptation GCP ............................ 27 Annex 2: Tools that aid replicability and scalability ................................................................................ 28 Annex 3: Partnerships for Water Security and Climate Adaptation ......................................................... 30 Annex 4: Concessional Financing in Private Sector Operations ............................................................... 31 LIST OF ACRONYMS 3 AF Additional Financing AI Artificial Intelligence ASA Advisory Services and Analytics BOT Build-Operate-Transfer CCA Climate Change Adaptation CCDR Climate Change Development Report CPF Country Partnership Framework CRI Climate-resilient irrigation CWIS Citywide Inclusive Sanitation DEC Development Economics Vice Presidency DIME Development Impact Evaluation DPO Development Policy Operation ED Executive Director FFI Framework for Financial Incentives FLID Farmer-led Irrigation Development FCV Fragility, Conflict and Violence GBV Gender based violence GCP Global Challenge Program GFF Global Financing Facility for Women, Children, and Adolescents GP Global Practice GWSP Global Water Security & Sanitation Partnership HNP Health, Nutrition and Population IBRD International Bank for Reconstruction and Development IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IFI International Financial Institution IOF Irrigation Operator of the Future IPF Investment Project Financing IPG Infrastructure Finance, PPPs & Guarantees JIP Joint Implementation Plan KWSSIP Karachi Water and Sewerage Services Improvement Project LMICs Low- and Middle-Income Countries MDB Multilateral Development Bank MIGA Multilateral Investment Guarantee Agency MPA Multiphase Programmatic Approach NRW Non Revenue Water PCE Private Capital Enabling PCM Private Capital Mobilization PforR Program for Results PPP Public-Private Partnership PROSAR Pernambuco Rural Water and Sanitation Project SCD Systematic Country Diagnostic SDGs Sustainable Development Goals SPIN Sustainable Power and Irrigation for Nigeria Project SSA Sub-Saharan Africa TOC Theory of Change 4 UN United Nations WASH Water, Sanitation and Hygiene WB World Bank WBG World Bank Group WHO World Health Organization WRM Water Resource Management WSCA Water Security and Climate Adaptation WSD Water Security Diagnostics WSS Water Supply and Sanitation WaterSAP Water Sector Assessment Programs 2030 WRG 2030 Water Resources Group 5 Global Challenge Programs OVERVIEW OF THE GCP Global Challenge Programs Fast Track Water Security and Climate Adaptation (WSCA) Approach Paper “We can no longer ignore the world’s crisis of wat er. We will fail on climate change if we don’t solve water. We will also fail on all the Sustainable Development Goals.” (The Global Commission on the Economics of Water, 2023) Why a GCP on Water? 1. Exacerbated by climate change, the global water crisis is one of the world’s most urgent multi- dimensional crises and is threatening the Sustainable Development Goals (SDGs) (Nature 2023). More than 733 million people live in a country with high or critical water stress and 345 million suffer from acute food insecurity (UN SDG Report 2022; World Bank 2022). By 2040, one in four children will live in areas with extreme water shortages (UNICEF 2019) and with half the world’s rivers crossing borders, and only one-third having international agreements, tension over waters is expected to rise. Unsafe water and sanitation are leading risk factors for child mortality (IHME 2019) and early childhood stunting worldwide (Danaei et al. 2016), impacting human capital and economic growth. Climate change is shifting rainfall patterns and increasing the frequency and intensity of floods and droughts, and without radical change, problems of too much, too little, or too polluted water will only increase (figure 1). Figure 1: Water security challenges around the globe Sources: Damania et al. 2017; FAO 2012; Jones et al. 2021; Richie and Rosado 2022; WHO/UNICEF 2023; WMO 2021; WWF 2022 2. More than $1 trillion per year are needed to meet water-related SDGs by 20301 (Strong et al. 2020). Historically, water, sanitation, and irrigation infrastructure, as well as their operation and maintenance (O&M), have been funded by the public sector. However, public funds are insufficient to meet the financial investments needed to achieve the SDGs. 3. The private sector has a crucial role to play in the urgent transformation needed to combat the global water crisis and achieve the SDGs. Although financing alone will not solve the water crisis, with the right incentives and enabling environments, the private sector can play a critical role in providing the capital, management expertise, and technical innovation needed to lower operating costs, increase revenues, enhance efficiency, promote a circular economy, and improve climate resilience. 1 Globally, estimated costs are as follows: access to safe drinking water - US$ 113 billion, access to safe sanitation services - US$ 150 billion, water pollution (industrial & agricultural) - US$ 153 billion, water scarcity - US$ 445 billion, water resources management - US$ 172 billion. 4. Increases in private participation and financing must be accompanied by supportive policies, institutions, and regulations. Though many markets are ready for private sector solutions, others will require a transition period during which risk mitigation instruments and concessional financing will be needed. Public funds must be spent more efficiently and wisely to create the enabling environment needed to attract private investments, regulate water use, and provide public services, including flood and drought risk mitigation and adaptation. What will the WSCA GCP do? 5. The WSCA GCP will leverage the Cascade principles alongside a One World Bank (One WB) approach to promote systems change and significantly grow investments across the water sector.2 To address the complex, interconnectedness of water and climate change, the program will promote stronger institutional and regulatory frameworks to protect and restore water resources while providing mechanisms and incentives for clients—and the World Bank Group (WB)—to work across sectors and boundaries.3 A One WB approach will be deployed in partnership with governments, the private sector, and other development partners to mobilize additional resources, such as grants and concessional funds, and ensure public resources are used more efficiently, galvanizing the private sector, and unlocking the capital and technical expertise that are critical to the program’s success.4 The approach aims to leverage private investment to achieve progress toward global targets. World Bank Areas of Focus 6. Tackling water security and climate adaptation demands a unified approach across the water sector.5 The WSCA GCP will work across three interdependent pillars to: (1) achieving universal access to safely managed water supply and sanitation; (2) scaling up climate-resilient irrigation (CRI) to increase food production and water productivity; and (3) reducing the impacts of floods and droughts and managing water resources sustainably.6 Each of the three pillars targets a specific aspect of the SDGs relevant to the given sector. Core analytics, such as Country Climate and Development Reports (CCDRs), Water Security Diagnostics (WSDs), and Water Sector Assessment Programs (WaterSAPs) integrate elements of each pillar7 ensuring proposed solutions are better aligned across institutions while integrating cross-cutting themes i.e., climate change, private sector participation, commercial financing, digitalization, enhancing water security in FCV (fragile, conflict and violence-affected) settings, and regulations and governance designed to support a menu of services. Together with existing corporate commitments e.g., the Paris Alignment Methodology, this will help ensure tradeoffs and synergies between climate adaptation and mitigation, and the SDGs are considered, and that development efforts support a livable planet. Scope and Intervention Logic 7. Tackling water security and climate adaptation marks a highly transformational period in global history that demands an integrated approach. Siloed approaches are no longer fit-for-purpose in the era of climate change, and multilateral development banks (MDBs) and other international financial 2 The Cascade principles seek to provide WB support for policy and regulatory reforms to foster private sector participation wherever an appropriate private sector solution exists, and to assess risks and the capacity of WBG instruments to address them, if necessary, with concessional and public funding. 3 This GCP focuses primarily on water-related climate resilience, given climate change impacts the water cycle where client needs are most pronounced. It emphasizes support for better preparedness and response to droughts, floods, and storms, and manage trade-offs and synergies among water, food, and energy systems. 4 One World Bank Group refers to the IBRD (The International Bank for Reconstruction and Development), IDA (The International Development Association), IFC (The International Finance Corporation), MIGA (The Multilateral Investment Guarantee Agency) in the context of water-related investments. 5 Defined as, “the availability of an acceptable quantity and quality of water for health, livelihoods, ecosystems and production, coupled with an acceptable level of water-related risks to people, environments and economies,” (Grey and Sadoff 2007). 6 CRI includes improved management of rainfed agriculture (green water) and improved management and expansion of irrigation (blue w ater). 7 WaterSAPs are a systematic multi-phased analytic approach to identifying PSP mobilization (expertise and financing) opportunities in the short- to medium-term. 8 institutions (IFIs) have a crucial role to play in supporting a unified approach, systematically assessing the potential for private sector participation and creating the enabling environment to mobilize large amounts of private capital. Program activities will support scalable solutions at the country and regional levels, but the roadmap will vary from country to country, reflecting the level of readiness and policy, institutional and regulatory arrangements. Recognizing that water is a critical input for the successful attainment of most SDGs, delivery mechanisms will work across the water sector, and alongside other sectors and GCPs, such as health, energy, food and nutrition, digital and biodiversity. 8. Approaches and interventions will be tailored to meet regional and country-specific priorities and needs. The WSCA GCP will be led by client demand and focus on replicability and scalability to deliver better and more solutions. Examples include closing gaps in access to safely managed water and sanitation, supporting the expansion of water-saving and climate-resilient irrigation services for vulnerable farmers, and enhancing water security and climate resilience through river basin management. These approaches will increase dialogue and elevate water sector priorities leading to informed decision making, while influencing better alignment across sectors and among development partners, the private sector, and governments. 9. Achieving water security is directly dependent on achieving greater gender equality. As key water users in domestic settings, women rely on access to clean water for cooking, cleaning, hygiene, and care tasks. When water and sanitation services are lacking, women are more affected, exposed to gender- based violence and negative health outcomes. Inability to manage menstrual needs due to inadequate sanitation and handwashing facilities, for example, is linked to school absenteeism. Women constitute a significant portion of the agricultural workforce, are affected by droughts and floods differently and can play key roles in mitigation and response. However, there is a notable gender disparity in representation in decision making spaces, employment (8 in 10 employees in water utilities are men), and access to extension services. The GCP will advance gender equality by promoting female participation in decision making, in technical and leadership positions, increasing access to extension services and capacity building opportunities, and promoting a development process that is inclusive and participatory. It will build on the analytical foundations and operational resources developed by the Water GP, such as its in-house Inclusion in Water program, how-to notes on gender and water, research on promoting gender equality in irrigation, and the Equal Aqua platform that has been advancing gender diversity in water jobs. 10. FCV settings will be a distinct cross-cutting theme. Replicable and scalable water security and climate adaptation initiatives will be sensitive to FCV settings, ensuring the root causes of conflict and fragility aren’t exacerbated, and wherever possible, delivered with private sector participation. Initiatives will consider opportunities for women’s empowerment and addressing gender-based violence, (box 1). Box 1. Enhancing water security in FCV settings for peace and stability Conflict, forced displacement, and weak or absent institutional capacity and policy buffers, mean FCV settings are more vulnerable to climate-related shocks and water insecurity. Interventions should follow five key strategies: 1. Preserve and strengthen institutional capacity to deliver services. Promote context-specific solutions, for example, short-term investments in fuel, solar panels to harness energy, and remote sensing to supervise and operate infrastructure. 2. Move from humanitarian to development approaches. Host countries need to adopt sustainable, long-term policies (WDR 2023: Migrants, Refugees, & Societies). 3. Invest in long-term engagement strategies. Support continued engagement with government and nongovernment actors, and increased inclusion of civil society in decision-making, implementation, and operation, including decentralization efforts, especially in designing and implementing affordable and easy 9 solutions. Transparency is imperative to strengthening social contracts and restoring the trust of civil society in government. Engaging with and considering the needs of women, persons with disabilities, youth, and other excluded groups is key for inclusive and sustainable development. 4. Support market entry to improve private sector participation. Heightened instability and insecurity in FCV markets, macroeconomic shocks and increased volatility of exchange rates, significantly increase operational risks and reduce investor appetite. Solutions include: de-risking mechanisms, political economy analyses to identify opportunities for private sector investment (e.g., WASH) or to close investment gaps (e.g., WRM and CRI), addressing risks faced by local micro-, small-, and medium- enterprises, and managing financial infrastructure and payment systems in crises. 5. Scale access to climate finance. Increasing financial capacity to absorb and leverage international climate finance to support adaptation including water security initiatives with tailored ASAs and training. Pillar 1: Achieving universal access to safely managed water supply and sanitation (WSS). 10. At the current pace, the world will not achieve universal access to safe WSS by 2030. Lack of access to safely managed WSS is a public health, economic, and environmental emergency in many Low- and Middle-Income Countries (LMICs). Globally, 3 in 10 people lack access to safely managed drinking water, 6 in 10 lack access to safely managed sanitation, while two billion people and more than 800 million children rely on health facilities or schools without basic WASH services. Access has regressed in Sub Saharan Africa (SSA) where in 2022 an additional 65 million people lacked water and 268 million lacked sanitation compared with the year 2000. The poor—and women and girls who are responsible for fetching water in 7 out of 10 households without a supply on premises—are disproportionately affected. Finally, unsafe water and sanitation are two of the leading risk factors for diarrheal disease, a preventable and treatable disease that killed more than 1.7 million people globally in 2017 (IHME 2019) with ripple effects on human capital and economic growth. Addressing technical constraints can lead to short- to medium- term gains in performance; however, achieving lasting change requires policy, institutional and regulatory reforms that address systemic barriers that continue to undermine access. 11. The WSS sector’s role in climate change has been ignored, yet water supply and sanitation contribute about 2 and 5 percent of global greenhouse gas (GHG) emissions, respectively. A recent study in Kampala (Uganda) showed high emissions from on-site sanitation systems (used extensively throughout cities in LMICs) constituted more than half the city’s total emissions (Johnson et al. 2022). Moreover, wastewater accounts for 7 to 10 percent of anthropogenic methane, and modern sanitation infrastructure and wastewater treatment can help reduce overall GHG emissions. Prioritizing climate action, demand management strategies, reductions in nonrevenue water (NRW), and a circular economy, while transitioning towards energy-efficient water utilities alongside sustainable and effective WRM can substantially contribute to climate mitigation and adaptation. 12. Strategic policy, institutional and regulatory reforms are fundamental to improving the performance and efficiency of service providers and meeting the SDGs. A long-term vision that focuses on demand management strategies, well-structured tariffs (and smart subsidies), reducing NRW losses, and the digitalization of utilities, as well as increased private sector participation and commercial financing, are central to the longevity and sustainability of sector reforms. This comprehensive approach can create the enabling environment required to achieve universal access, while addressing risks associated with the overreliance on short-term financing and external funding, mitigating long-term financial instability and reducing the financial burden on municipal-level service providers and utilities. Key Areas of intervention I. Establishing the enabling environment for policy, institutional and regulatory reforms that align funding with incentives for increasing access to safely managed WSS services, improved governance 10 (including better intergovernmental coordination), sustainable tariffs, targeted subsidies, and climate mitigation and adaption. Measures to reduce methane and other greenhouses gases will be prioritized. II. Supporting reforms that incentivize private sector participation and commercial financing, while promoting bankability through de-risking and concessional instruments. III. Improving performance, efficiency, and long-term sustainability of utilities by scaling up proven, replicable approaches, such as Utilities of the Future (UoF) and Utilities for Climate (U4C), to increase capacity, strengthen management and customer-orientation, and help utilities become creditworthy attracting much-needed private or public capital. This area is aligned with the Energy GCP in enabling energy efficiency, utility reform, PPPs and improved regulatory environments. IV. Ensuring universal access to safely managed and climate resilient WSS services. This includes targeted investments to expand coverage to safely managed WSS services, affordable technologies, and service models as well as water demand/consumption management strategies. Where applicable, investments will target areas experiencing a high burden of water- and sanitation-related disease risk, such as cholera, alongside other preventive health measures. V. Increasing access to basic WASH in schools and health facilities. This includes constructing and rehabilitating WASH infrastructure in schools, health facilities, and hospitals, hygiene promotion, and establishing working O&M procedures to ensure sustainable service delivery. Parallel investments will be made in behavior change through mass communication and awareness building campaigns. This area is aligned with the Health Emergency Prevention, Preparedness, and Response (HEPPR) GCP and involves close collaboration with the education sector. VI. Expanding water quality monitoring networks and information management systems. This includes investing in water quality testing labs and modernizing water quality monitoring equipment and networks. To reduce exposure to microbial hazards and priority chemical contaminants, such as lead, repairing and replacing faulty water pipes will be prioritized as part of wider rehabilitation and renewal programs. VII. Launching “new water” programs that emphasize circular economy approaches by supporting investments in desalination and wastewater reuse, as well as demand management activities that include NRW reduction, water conservation measures and nature-based solutions. This activity will maximize the impact of scarce public resources by introducing the private sector, and mobilizing climate and commercial financing, enabled by upstream reforms where necessary. Where sector reforms are nascent and risks remain high, guarantees, risk-sharing instruments, and viability gap and concessional funding will be key to crowd-in commercial financing and private participation. Pillar 2: Scaling up climate-resilient irrigation (CRI) to increase food production and water productivity. 13. Climate change impacts, growing populations, and competing demands for water will affect food production and potentially impact nutritional outcomes. Anticipated impacts on food security make climate-resilient irrigation necessary to feed people and ensure a livable planet. A third of the world’s population struggles with moderate to severe food insecurity and highly volatile food prices. Rural GDP is directly related to rainfall risk, predominantly affecting smallholder farmers who are disproportionately dependent on rain. Irrigation helps farmers cope with water insecurity caused by increasingly unpredictable rainfall events and droughts that limit the world’s ability to meet SDG2, zero hunger. CRI could produce food for about 1.4 billion more people while supporting a livable planet (Rosa 2022). 14. Innovative irrigation technology and performance assessment and benchmarking can boost water efficiency and productivity. Promising trends include rising levels of business-to-consumer arrangements in farmer-led-irrigation, precision agriculture, water use efficiency and improved water productivity, performance benchmarking, and access to credit, markets, and payments. When not financed by the 11 public sector, these arrangements are implemented through sale, lease, or rental models, often using a pay-as-you-go model. Innovative irrigation technology and performance assessment and benchmarking are particularly relevant to farmer-led irrigation by plugging the gap between large-scale irrigation infrastructure and on-farm water use. Their scaling requires supporting the public sector in improving regulations for water resource use and delivery, and creating an enabling environment for private sector participation and financing (Waalewijn et al. 2020). 15. The WSCA GCP will focus on strategic sector reforms and scaling proven financing models to accelerate access to irrigation services. This pillar complements the Food and Nutrition Security GCP and the Energy GCP. Investments in CRI must be aligned with other investments that rely on water, influence water availability or quality, or both. Key Areas of intervention 16. The Bank is already working on systems change and policies to scale up irrigation to support government programs, including new and improved irrigation services and performance, farmer-led irrigation development (FLID), emissions reduction, and financial sustainability as a pre-requisite to improving private capital mobilization. The increased presence and reach of non-banking financial companies (NBFCs) and micro-finance institutions, and growing interest from commercial banks in the irrigation sector, have increased the availability and affordability of credit for smallholder farmers. Global climate concerns are expecting to increase the number of green funds and green stimulus programs and encourage the leveraging of private investments for climate-resilient irrigation. I. Expanding and modernizing irrigation and drainage. Activities to increase food production include; improving agricultural water productivity, innovation such as precision irrigation, selection of improved seeds and plant varieties, increasing production from rainfed and irrigated schemes, expanding climate-resilient irrigation within the local limits of natural resources, and modernizing irrigation (including pressurized systems). II. Maximizing opportunities to reduce GHGs through: o Paddies for the Planet and Producers. Solutions to reduce emissions and save water without sacrificing rice production include Alternate Wetting and Drying (AWD), System of Rice Intensification (SRI), and Dry Direct Seeding. o Transitioning to renewable energy sources, for example, solar pumps (including Agrovoltaics). o Reducing energy footprint by encouraging energy efficiency in delivery and utilization. III. Improving governance, alignment of policies and regulations, and financial sustainability to break the build-neglect-rebuild cycle. This intervention requires improving access to and performance of irrigation services to farmers in private or government-led irrigation at all scales. It includes: o Scaling up private sector-led irrigation referred to as farmer-led irrigation through results- based financing for improvements in capacity and access to tools, technology, and credit. o Promoting Irrigation Operators of the Future in public sector-led irrigation through activities that break the build-neglect-rebuild cycle including modernization, financial sustainability to fund O&M and/or improve private sector participation by de-risking key investments. Pillar 3: Reducing the impacts of floods and droughts and managing water resources sustainably. 17. Climate change is increasing hydro-variability and intensifying floods and droughts creating pressure on already-stressed water resources and amplifying problems caused by unsustainable use. Many countries have advanced their development agenda at the cost of water resources, resulting in poor water quality and reduced availability; others are neither making ample use of the resource to facilitate 12 their development nor adequately reducing water risks. The changing climate necessitates improved modes of management, including balancing water needs for climate mitigation and adaptation as well as sustainability. Different and more resilient infrastructure will be needed to manage more variable water flows caused by climate change, and many countries will need more water storage, both natural and built. 18. This WSCA GCP will reduce hydro-climatic risks, particularly from floods and droughts, increase capacity to manage more variable water flows, and improve sustainable water management at local, national, and transboundary basin levels. It will support institutional frameworks, information systems, and management measures to ensure water can be used to fuel development in the near and long term, rather than serving as a source of conflict and loss of livelihood or wealth. It will provide incentives to encourage greater collaboration and compliance across sectors and jurisdictions, including quality and quantity of surface and groundwater, integrating nature-based solutions into development and management planning. It will include strategic sector reforms to accelerate and improve water security outcomes and water system services. Finally, it will help build client capacity to address the synergies and trade-offs in addressing climatic risks and other water-dependent outcomes like food and energy. Key areas of Intervention I. Restoring and managing rivers, lakes, and aquifers for people, the planet and prosperity. This intervention will involve cross-sectoral planning and basin management, including developing legal and institutional reforms to strengthen water management and disaster risk management agencies, basin organizations, hydro-meteorological service providers, and other sectors that rely on water. It will also require building capacity for monitoring (e.g., hydromet and remote sensing), modeling, analytics, forecasting, and enforcement, enhancing the capacity to engage stakeholders, raise awareness and shift behaviors. Other critical elements include catchment, river, and aquifer restoration; pollution reduction; biodiversity protection; and efforts to increase the financial solvency of water resource managers. Engagements will take place at various scales as needed, ranging from community to transboundary levels. II. Increasing climate resilience through flood and drought risk reduction. Disaster risk reduction involves quantifying risk, identifying the most at risk, contingency/emergency planning and longer- term planning, and investments such as those to rehabilitate and build new water storage, including groundwater. It also involves risk layering and financing mechanisms adapted to key sectors and drought and flood risk insurance products that target multiple levels of decision making. Finally, it involves developing approaches to manage the financial impact of droughts and floods. III. Investing in multipurpose—green or gray—infrastructure to enhance climate adaptation and water security. These investments ensure adequate water quality and quantity for human and ecological use. They can include natural and built water storage/reservoir development and rehabilitation/retrofitting, dam safety activities, groundwater development and recharge, distribution network expansion, and nonpoint source pollution reduction programs. What’s different? 19. Synergies with other GCPs: Figure 2 illustrates the common areas of activity and programming between this GCP and the other GCPs prioritized by the World Bank. In addition to these common areas of work, there is complementarity in corporate score card indicators, including the number of people made more resilient to climate change, and the indicators related to food, water, and the environment. Coordination across the GCPs at the global, country and task team levels will be done through management coordination meetings, SD structures, and in utilizing Bank processes to create greater alignment, including CCDRs, SCDs Country Partnership Frameworks. Similarly, the ASA to be undertaken 13 as part of the GCP, including Flagships and Water Security Diagnostics, will be conducted in partnership with – or with inputs from – the relevant sectors. Figure 2: Synergies with other GCPs 20. WSCA GCP and Country Partnership Frameworks (CPFs): A One WBG approach offers public and private solutions to governments committed to sector reforms that target water security (Figure 3). The collective capital, knowledge, tools, products, expertise, and partnerships of WB institutions are key to delivering the WSCA GCP, which will offer a menu of investments and policy reform options for participating countries in line with their CPFs. These investments will contribute to high-level outcomes consistent with a country’s development goals, and help amplify impact at scale. Figure 3: Water for people and the planet: Value-added proposition of this GCP 14 21. Comparative advantage: The GCP will help scale solutions for water security and climate adaptation, while the WB's convening power will create and strengthen partnerships and mobilize funding. WB diagnostics will help countries understand their key opportunities and constraints and identify needs to achieve critical development outcomes, with measurable, time-bound indicators. The WB's long-term client engagement strategy will provide the time needed for strategic investments to be prepared and implemented and for sector reforms to take root, including creating the enabling environment for greater private sector participation where needed while strengthening institutional capacity to engage citizens. 22. The WB, along with its partners, has developed replicable and scalable solutions and tools (annex 2), many of which include increasing private sector participation to meet country-specific needs. I. A central provider for more private sector capital and participation: the One WBG approach is a key comparative advantage providing unique expertise that straddles public and private solutions. The GCP will work with committed reform-oriented governments to deliver results with a focus on speed, scale, and replicability. II. The WB’s suite of standardized diagnostics and planning tools help countries better understand existing vulnerabilities. Water Security Diagnostics help countries identify key economic, health and environmental challenges while providing actionable recommendations. They provide a systematic approach, both within and outside the WB, to improve water security and help set the course of future reforms and activities. They also provide guidance on water challenges within a broader context of national (or regional) macroeconomic trends and development objectives, such as the SDGs and CCDRs. WaterSAPs use analytics to create a structured country-level roadmap for identifying (1) constraints to private sector participation, and (2) private sector expertise and commercial financing opportunities in the short- to medium-term. This roadmap guides discussions with client countries to develop a prioritized pipeline of investments that will generate the desired service delivery impacts and water security outcomes, while mobilizing private capital. III. Cutting across silos: The One WBG approach reflects close collaboration within the WB (Water, Climate Change, Energy, Agriculture, Urban, Environment, and Governance GPs, Infrastructure Finance, PPPs & Guarantees [IPG], Development Economics Vice Presidency [DEC]), as well as the IFC (Infrastructure and Natural Resources, Manufacturing, Agribusiness and Services, Financial Institutions Group, and Transactions Advisory), and MIGA (Operations Group and Economics and Sustainability Group). To help monitor global progress and to inform new ways of addressing challenges, the GCP will undertake new analytical work on CRI and water use; water-energy-food nexuses; hydroclimatic planning and stress testing; water for people, nature, and biodiversity; and universal access to climate-smart sanitation systems. IV. Advancing innovation through digital and data-driven approaches and cutting-edge technologies: The water sector is embracing digital and data-driven methods and harnessing advanced technologies, such as sensors, artificial intelligence (AI), big data, and smart meters, in water supply, wastewater reuse, desalination, irrigation, hydrological monitoring, and disaster risk reduction. Private sector involvement is crucial to leverage expertise, innovation, and investment capital to enhance technology adoption. This shift enables real-time monitoring, predictive analytics, performance assessment, and benchmarking, increasing efficiency and enhancing system resilience. The GCP will also pursue wastewater-based epidemiology in collaboration with HEPPR GCP. The WSCA GCP aims to leverage digital transformation and advanced technologies to assist clients with meeting their water sector priorities and goals. Exploration of AI for project management is underway, with collaboration across GPs to develop a comprehensive digital strategy in the water sector and establish a water-sector cybersecurity maturity model. 15 How will the WSCA GCP work? World Bank Menu of Options and Implementation 23. The GCP will change how the One WBG approach is deployed across engagements and will use multiple instruments to help countries overcome persistent water challenges. Importantly, the WB will spearhead awareness-raising campaigns at the global, regional, and national levels to highlight the seriousness and scale of the water crisis and help mobilize partners to support solutions. Clearly defined development outcomes will ensure partnerships with other donors and the private sector are aligned, increasing impact as well as investment. 24. The Cascade principles will be leveraged to combine expertise from the WB, IFC, and MIGA and increase the ability of member countries to draw on private sector resources to meet their development goals. When support for a country’s water sector is being considered, the country’s potential for accessing private sector expertise and capital can be evaluated. When that potential is reasonably high in the short- or medium-term, IFC and/or MIGA could be included within the originating team to design and implement enhanced solutions oriented towards the private sector. Joint Implementation Plans (JIPs) would clarify the objectives and roles of staff from different parts of the Group. When the potential for accessing private sector expertise and capital is low in the short-term, IFC and MIGA will accompany the WB’s team on the work on sector reform by providing input and feedback, including through the new guarantee platform. Consistent with IEG recommendations on previous One WBG approaches, such as joint projects and Country Private Sector Diagnostics (CPSDs), an institutional mechanism for tracking progress at the country and aggregate levels would also support implementation, at least for the short-term. 25. The WSCA GCP will leverage the new WBG unified guarantee platform, available July 1, 2024, that moves guarantee experts across the WBG under one roof and combines all cross-border WBG guarantee products into a single delivery platform. This is expected to deliver private sector and country clients with improved access to guarantees through simplicity and faster execution. Additionally, IBRD projects under the WSCA GCP could potentially benefit from the volume, pricing, and tenor incentives from the newly established Framework for Financial Incentives (FFI), such as transboundary water resources management projects which have important cross border externalities or innovations. 26. The WSCA GCP builds on lessons from past water sector reforms and private sector engagement to balance ambition with reality in how it leverages a One WBG approach. Three lessons emerge: I. Existing policy, institutional, and regulatory systems undervalue water and offer weak incentives to improve efficiency and increase access to finance. The GCP will thus support upstream reforms to establish robust governance and address foundations of creditworthiness to mobilize private capital. II. Concessions have proven viable when using a mix of public and private financing, concessional finance and access to local currency debt financing , alongside “affermage” contracts, subsidies to expand access to lower-income households, and a gradual move towards full cost recovery. III. Several high-profile PPP failures in emerging markets in the 1990s and 2000s resulted from weak contractual and regulatory design, overly ambitious expectations and targets, and opposition from civil society and other key stakeholders. Strong stakeholder engagement processes, proper 16 allocation of risks between public and private parties, a clear governance framework, and flexible contractual and regulatory structures will be intrinsic to future PPPs under this GCP. 27. The following solutions account for these lessons and provide opportunities to build replicable models for crowding in private sector expertise, innovation, and capital: a) Removing binding constraints to increase the pipeline of bankable projects by: promoting enabling environment reforms, improved governance, improved creditworthiness of utilities and service delivery agencies, increasing the availability of local currency, and technical and financial efficiency. b) Diversifying and expanding funding solutions and partnerships: with appropriate de-risking, public (concessional) and private funding can be blended. Mechanisms include pooled financing facilities, hybrid PPPs (box 2), partial risk guarantees, MIGA political risk insurance and credit enhancement, and the private sector window (PSW)/MIGA guarantee facility.8 c) Creating synergies between governments and the private sector: While governments play a leading role in improving sector governance, regulation, water pricing instruments, resource allocation, and capital planning, the private sector can play a key role in supporting efficiency gains and provide much-needed capital, technical expertise, and innovation. By combining technical assistance with long-term capital, integrated WB approaches will reduce financial risk and crowd in the private sector. For example, in Brazil regulatory and policy reforms enacted through the Sanitation Law resulted in a series of PPPs and concession contracts lead to new investment commitments during the period 2020–22 (box 3). These commitments are be supported by systematic engaging the private sector to unlock its expertise and innovation and create system-wide efficiency gains. Box 2. Addressing bankability and affordability constraints with Hybrid PPPs Hybrid PPPs are a financial viability mechanism that address bankability and affordability constraints by combining concessional public funding and private funding/operation. The Hybrid PPP Initiative offers a One WBG solution for governments to attract private capital into critical public assets and services. The WB supported a hybrid PPP launched in 2017 to build and operate several wastewater-treatment plants along the river Ganga. It was structured by the IFC transaction advisory with capital subsidies through the WB’s Investment Project Financing (IPF) and a WB payment guarantee backstopping the government’s obligations to several PPPs. The ‘Scaling ReWater’ programmatic collaboration between the IFC, MIGA, and IBRD/IDA will scale up hybrid PPPs along similar lines. 28. Examples of standardized support packages involving the private sector: • Private sector delivery solutions for new water source and irrigation infrastructure, and nature-based solutions through PPPs, commercial financing, and market-based mechanisms. • Blended finance solutions, combining appropriate IDA concessional funds, IFC investment, private investment and commercial debt financing, donor concessional funding, MIGA guarantees and credit enhancement products, and other de-risking instruments. • Performance-based contracts to address technical and operating inefficiencies (e.g., NRW reduction and O&M for irrigation schemes). • Linking agri-markets through agribusiness companies, blended financing, first loss guarantees, and facilitation of value chain finance for distributors and retailers of water use efficiency technologies. • Tapping of carbon markets through investments in solar pumps, energy efficiency in irrigation, methane reduction in sanitation, through climate investment funds, WB-administered funds, and externally managed funds 8The MIGA credit enhancement product (non-honoring of financial obligations) could be used to attract financing from commercial lenders for public water projects. The MIGA trade finance guarantee product could be used for purchases of imported goods by public utilities. 17 • Results-based/output-based financing and microfinance to reach underserved populations and vulnerable, off-grid populations, including households, communities, institutions (schools/health facilities), and farmers through farmer-led irrigation development. • Payment for environmental services schemes and green bonds for restoration of critical landscapes and wetlands to reduce floods and droughts. • Support of water and wastewater markets through the transfer of water rights and entitlements in regulated and voluntary contexts. 29. Sustainable reform requires time and planning. Achieving water security, universal access to WSS, and food security through CRI, will require a sustained focus, which is hard to achieve over the lifespan of a single project or intervention. Moreover, the investments required for achieving these goals will not be met through public resources alone. To ensure the sustainability of these efforts, in many cases the WB will implement multiphase programs (also referred to as multiphase programmatic approaches, or MPAs) within a single country or region. These commitments involve working with various partners within the WB and other MDBs, IFIs as well as investors, academia, NGOs and civil society, and R&D institutes. These programs allow for a progressive reduction of the burden on public funds through a phased approach (figure 4), with each phase serving as a foundation for future investments. Within these MPAs, the choice of financing instrument will remain flexible to serve project, country, and regional contexts. Initial phases focus on policy, institutional, and regulatory reforms as well as private capital enabling (PCE) engagements, creating the conditions for creditworthiness and financial sustainability. Subsequent phases focus on private capital mobilization (PCM) through the design of appropriate blended finance solutions, hybrid PPPs, de-risking and credit enhancement tools. Phases are not necessarily sequential and can be tailored to the country context, market readiness, and client capacity. MPAs allow for programmatic delivery that reflects long-term WB and government commitment while providing a framework for development partners and the private sector to align efforts to maximize impact. Consequently, complex reforms and investment preparation can occur even as ready-to-move projects are being implemented. When MPAs are not possible or advantageous, other combinations of instruments can be used. Figure 4: Multiphase Programmatic Approach 30. As part of Phase 1, three WaterSAPs are already underway (Jordan, Uzbekistan and Bangladesh), and another 10 countries are planned for FY25 utilizing the collective expertise and resources of the WBG. 18 Figure 5 illustrates the phased approach of an MPA under preparation in Senegal taking shape through a JIPs. Two more JIPs for MPAs are under development in Azerbaijan and Côte d'Ivoire. Figure 5: Example of a Multiphase Programmatic Approaches under development - Senegal Water Security and Sanitation MPA 31. Where legal or policy reforms or technical coordination of government actors is needed, water- specific IBRD/IDA instruments such as development policy operations (DPOs) or broader DPOs with water elements, program for results financing (PforR), and performance-based conditions in IPFs will help incentivize reform. These instruments can also be used to deliver diverse financing solutions, including microfinance, revolving funds, management contracts, debt (through a combination of bonds and loans), vendor and value chain finance, guarantees and PPPs. These instruments can be combined with: • WB Treasury innovations for insurance products, sustainability-linked and catastrophe bonds, pooled risk facilities, contingent financing. • IPG engagement on payment and loan guarantees, asset recycling, and hybrid PPPs. • IFC support for bankability, transaction advisory for PPPs, and debt and equity investments, including subnational lending. • MIGA support for blended finance, political risk insurance, and credit enhancement. 32. Efficiency: The “predictability” achieved through longer-term engagements (e.g., through MPAs) will reduce project preparation and approval timelines because teams can include studies and design early on, and client project implementation units can be maintained for longer periods of time. To achieve additional efficiencies, the WSCA GCP will ensure lessons are captured quickly to inform subsequent phases. It will focus on creating replicable models and scalable projects that can be tailored to country contexts (box 3). Box 3: Examples of WB replicable models and scalable projects Past examples of successful private capital mobilization: • IFC Utilities for Climate: $500M of commercial loans to date, to utilities serving ~70 million people • Brazil: $13B in investments reaching 30 million beneficiaries via 28 PPPs and concession contracts awarded since 2020, as well as $6.8B of concession payments for the local governments, freeing up public budget for additional infrastructure investments; 31 additional PPP tenders in the pipeline, amounting to $4.9B of additional investments reaching 11 million more beneficiaries; on track to meet SDG6 by 2033 19 • India: Clean Ganga Hybrid Annuity Model for PPPs launched projects worth $1.5B in investments, of which $650M raised from the private sector as part of a larger river restoration program; basin-wide replication has the potential to impact another 600 million people • BITA guarantee in Angola: $910M raised through commercial loans on the back of $500M partial loan guarantee; 2 million people impacted • MIGA guaranteed AS Samra Wastewater Treatment Project in Jordan: $205M of total investment, including ~$92M in private investment; 3.5 million people impacted • Indonesia: $159M in commercial loans/PPPs; commercial finance under National Urban Water Supply - project goal of reaching an expected 6 million people • Morocco: $36M first loss guarantee for solar and drip irrigation distributors with subsidies • Bangladesh: $7.5M in micro-finance loans, upcoming WSS PPPs; benefitting ~9 million people • Commercial loans via reforms in Uganda: $40M raised from 3 banks; utility serving 18 million people Ongoing efforts for increasing financing for water sector investments • Programs to improve monitoring/resilience in FCV settings: Afghanistan, Comoros, Democratic Republic of Congo, Ethiopia • Country-level partnerships for financing and private sector participation: Bangladesh ($100M PCM expected; wastewater services proposed for 20 million people), India ($50M financing expected for MIS and DSR; $25M in value chain investments), Kenya ($10M financing proposed for operational efficiency and service delivery; up to 2 million people impacted), South Africa ($21.4M proposed for catchment restoration in Greater Cape Town area) • Partial risk guarantees for bankable PPPs, support to FIs lending to SMEs/ farmers: India, East Africa – Ethiopia/ Rwanda FLID focus • Climate finance, blue/green bonds, SSL/SSB, adaptation, credits for emissions reduction: Pakistan (results- based grant of $30-40M) • Scaling PPPs to be advanced with IFC Advisory, WB VGF, credit enhancement and use of PSW/MIGA Guarantee Facility, and 2030 WRG TA: Bangladesh/Pakistan: ($125M investment for Karachi), Peru and Senegal (proposed PCM of $60M for WWTP; > $1B PCM for interbasin transfer PPP; PCM for transfer project of >$1B [TBC]), Tanzania • Commercial loans through reforms: Kenya, Indonesia, Cambodia ($17.6M estimated PCM; 175,000 expected beneficiaries from WSS investments and improvements) • Climate investment funds in solar-powered irrigation systems and in watershed/landscape management programs • India (successful bidding for irrigation distribution system O&M contracts) • Global Agriculture & Food Security Program (GAFSP) public and private sector windows to support irrigation equipment providers - $1.6B in grant financing to countries, $493M to support private sector development, and $46.4M to farmers/producer organizations - reaching 16.6 million people. • Greening Irrigation for Mitigation and Scale-Up Access to Climate and Carbon Finance in China Replicable programs with large-scale impact: • Ethiopia’s “One WASH National Program” (OWNP) a sector wide approach (SWAp) involving the water, education, health, and finance and private sectors. • Indonesia’s rural Water Supply and Sanitation project PAMSIMAS, has benefitted 24 million people with improved access to water supply 16 million with access to improved sanitation. • DRC’s WSS Access MPA (“PASEA”) targeting 3 million people with access to water supply and 2 million with access to sanitation. In addition, the Program will provide WASH facilities in 350 schools and 150 health care centers across 4 poor provinces. • Uganda’s micro scale irrigation program catalyzes the FLID process by supporting smallholder farmers overcoming their knowledge and financial constraints. • China's Yangtze River Protection and Ecological Restoration Program uses performance-based incentives and piloting to improve river water quality, reduce plastic and other pollution. It involves national, provincial, local levels working towards common restoration goals. 20 Partnerships and Financing 33. Implementation will require political leadership and the capacity to generate broad public support for reforms. Clearly articulated mandates, complemented by efforts to engage society in the change process, will be a driving force for the WSCA GCP. The GCP will bring global and country-level stakeholders together to co-create innovative solutions, support reform processes, and ensure coordinated delivery, including mobilization of grants, concessional resources, and commercial financing to supplement WSCA investments. Such partnerships will be structured at the regional and country levels, and a new Global Consultative Group for Water Security and Climate Adaptation will be established at the global level. • Regional and country levels: Client-owned regional and country partnerships will serve as the key vehicle for convening stakeholders to create a shared vision of water security for achieving the SDGs. Depending on a country’s institutional architecture and needs, partnerships may bring government ministries, private sector, civil society and academia, development partners, MDBs, and IFIs together to facilitate financing as well as partnerships for transformational impact, and drive upstream sector reforms to strengthen the enabling environment for private sector solutions and financing. Partnerships will build on upstream activities and analytics (annex 3). • Global level: The Global Consultative Group for Water Security and Climate Adaptation with high- level representation from global leaders of the public and private sector, IFIs, UN and civil society organizations will (1) raise awareness of the magnitude of the challenge, (2) increase visibility of successful approaches at the local level, (3) promote new financing mechanisms and implementation models, and (4) foster collaboration and partnerships across the private and public sectors to support water security and climate adaptation outcomes. 34. These partnerships will build on existing convening structures, including (1) the Global Water Security and Sanitation Partnership (GWSP), a key multi-donor partnership supporting policy advice, project design, capacity building, and analytical tools, with a strong focus on inclusion and gender; (2) the MDB Water Directors Working Group for coordinated approaches to water security and climate adaptation and scaling up finance in the sector; (3) the 2030 Water Resources Group (2030 WRG), a global public- private collaboration platform aimed at leveraging private sector capacities, resources, and solutions; and (4) IFC & MIGA Professional Networks for private sector mobilization and participation in water projects. In addition, the WSCA will facilitate engagement with UN agencies, civil society organizations, and NGOs for more impactful country-level implementation, especially in FCV contexts. A case in point is engagement with the Climate-Resilient Sanitation Coalition, which focuses on advocacy among key global and country stakeholders and financiers on climate-resilient, citywide inclusive urban sanitation to generate evidence and support decision-making by public officials in client countries. Another initiative supported under the GCP is a global pledge by governments, private sector entities, and other partners to stop the flow of lead in drinking water by 2040. Partnerships will help clients attract climate finance for water-related adaptation and mitigation results from WB-administered funds and externally managed funds. Knowledge and Learning 35. The WSCA GCP aims to put knowledge and learning into action, by leveraging the comprehensive knowledge architecture—technical expertise, solutions, tools, and global and country diagnostics —the built by the Water GP through the GWSP. The GCP will apply a “knowledge-to-implementation” approach to deliver appropriate and readily accessible knowledge where needed and build agile feedback loops to channel experience and evaluation back into the process. High-level knowledge exchanges will foster and enable greater leadership from client countries and create coalitions for reform. 21 36. The following global knowledge programs and initiatives will be crucial to successfully implement the WSCA GCP: • Global flagships and analytical work: Several new global flagships are being developed that will influence the global water security and climate adaptation agenda, such as: Climate Resilient Irrigation and Water Use; Global Water Monitoring Report; Water for People, Nature, and Biodiversity; and Achieving Universal Access to Climate Smart Sanitation Systems. These initiatives are strategically designed to foster an integrated approach to global water and climate-related challenges, applying lessons from global knowledge to regional and local contexts. • Knowledge and learning at the regional and country levels: Collaboration with external technical partners is instrumental to advancing sustainable water management and use, creating the political economy for reform, and stimulating innovations. The GCP program countries will draw on Singapore’s lessons and experiences in urban water management through Water Global Practice’s Singapore Water Center (SWC). • Research and academia: The WSCA GCP will tap into a network of academics from top universities and think tanks worldwide. These experts will contribute foundational knowledge for GCP knowledge and learning activities. • Internal support systems: Internal systems such as the GWSP AskWater Service Desk link countries with Water GP experts and knowledge at the WB, and the Global Facility for Transboundary Waters Cooperation connects teams to experts. 37. This GCP will support the World Bank Academy as it scales up capacity development for clients. Client capacity is key to building strong institutions that can formulate, implement, and sustain policy reform and provide high quality services. It will align capacity development efforts with WBG operations and policy dialogue in response to the specific needs of in-country stakeholders through a programmatic approach. A set of core courses supported by engagement activities, deep dives and seminars that go well beyond training will be delivered in the Singapore Water Center (SWC) and institutions from Bank’s client countries such as the 2iE - Institut International d'Ingénierie de l'Eau et de l'Environnement in Burkina Faso. This approach will also leverage and align initiatives underway including the data hub, regional hubs, and the water community platform. Results and Program Management Measuring Results and Key Indicators 38. The program theory of change (TOC) (Annex 1b) includes the main expected results at different levels (outputs, intermediate outcomes, and outcomes) across the program’s three objectives. Results will be aggregated for key indicators under each results level and reported based on information from monitoring instruments used by the WBG. Key indicators (box 4) include 12 of the 22 WBG Results indicators included in the Corporate Scorecard, ensuring results from the GCP are captured and reported at the highest corporate level. Results will be disaggregated by gender and for FCV contexts, when possible. The TOC illustrates how proposed outcomes within projects can be mapped to key GCP indicators. 22 Figure 6 Theory of change: Senegal Water Security and Sanitation MPA Box 4 Key Indicators Key indicators * = Indicator in New Corporate Scorecard Pillar 1: Achieving universal access to safe water supply and sanitation Outcome level: • Millions of people provided with water, sanitation, and hygiene (of which % is safely managed) * • Millions of people receiving quality health, nutrition and population services* • Net GHG emissions per year* • Volumes of water and wastewater treated (m3/year) Pillar 2: Scaling up climate-resilient irrigation to increase food production and water productivity Outcome level: • Millions of people with strengthened food and nutrition security* • Net GHG emissions per year* • Farmers adopting improved agricultural technology (of which # female) • Land area with new/improved irrigation services Pillar 3: Reducing the impacts of floods and droughts and managing water resources sustainably • Millions of people with enhanced resilience to climate risks*(includes flood and drought risks) • Millions of hectares of terrestrial and aquatic areas under enhanced conservation and management* • GW of renewable energy capacity enabled*Biochemical oxygen demand pollution loads (tons/year) Cross cutting theme: Enhancing water security in FCV settings for peace and stability • Millions of displaced people and people in host communities provided with services and livelihoods* • All the indicators used above, disaggregated for FCV contexts. • # of FCV countries supported by the GCP Applying a private sector lens Private capital enabled* Private capital mobilized * Contributions to other corporate scorecard outcome areas • Millions of people using digitally enabled services* • Millions of people benefitting from greater gender equality, of which (%) from actions that expand and • enable economic opportunities* 23 39. In addition, the GCP—with support from DEC and DIME, IEG, IFC’s Development Impact Department and in collaboration with the WHO/UNICEF Joint Monitoring Programme —will design an impact assessment strategy to strengthen government capacity to collect and use information about access to safe water supply and sanitation, irrigation, flood and drought risk, water resource mapping, and conflict. This effort includes curating and hosting global datasets and methods for measuring climate and conflict risk to safe WSS, building government data capacity, scaling data capacity building, improving data discoverability with AI, and improving monitoring and evaluation with satellites. An evaluation program for the Senegal Water Security MPA will be designed using integrated data and research to stimulate portfolio-wide learning, doubling the impact of operations, and scaling up most effective modalities. Operationalization 40. A joint MIGA, IFC and World Bank team is in place to deliver the GCP. The group will continue to meet periodically to advise regional project teams, monitor evolution of the program and needed changes, and produce briefing materials throughout program implementation (Annex 1a). Indicative Pipeline and Next Steps 41. In response to the water crisis and to deliver impact at scale, the joint WBG team has identified projects and programs that can be augmented with long-term WB engagements such as MPAs, IFC PPP advisory, upstream interventions. Select examples include: • Resilient and Healthy Rivers for People and Planet in South Asia with the objective of enhancing water security and climate resilience through improved river basin management, water pollution control, and flood and drought management. • Ethiopia Sustainable WASH Access Project, a 10-year phased engagement to increase access to improved, sustainable, and climate-resilient WASH services. • Cambodia Water Security Improvement Project will address water security under climate change induced floods and droughts, by improving water security for multiple water users, enhancing CRI services and improving water productivity for agricultural and domestic use. • Sustainable Power and Irrigation for Nigeria (SPIN) will address water resources management, water security, and energy security challenges in Nigeria through investments in irrigation, dams, storage infrastructure, and hydropower planning. • Chattogram Water Supply Improvement Project will support Bangladesh in advancing the utility reform agenda ensuring long-term sustainability of water supply and sanitation services by financing infrastructure investments and strengthening institutions. • PPPs in Egypt, Uzbekistan, and South Africa to increase access to safely managed water supply and sanitation by diversifying water supply sources (desalination, greywater, blackwater and wastewater reuse, NRW reduction). • Expanding wastewater treatment capacity in Türkiye by providing commercial capital and technical assistance to subnational entities. 42. Next steps: The concept, philosophy, and approach of the WSCA GCP and related products are being introduced to partners and clients through a series of activities, including trainings and workshops. Consultations with partners have been conducted over the past several months with bilateral donors, UN agencies, other MDBs, private sector representatives, and civil society organizations. Driven by client demand and needs, the GCP framework will be used to help establish long-term programs. Eligible joint projects in the pipeline are being prioritized. Programs are being designed through foundational analytics (e.g., WSDs, WaterSAPs) in collaboration with our partners, and will be delivered through JIPs (Annex 1a). 24 Reporting 43. A progress report on GCP delivery will be discussed with the Board at the end of the first full year of implementation (FY25) and henceforth annually during the last quarter of the fiscal year, including reflection on lessons learned to inform future operations. 25 Annex 1a: Operationalizing the One World Bank Approach By allowing the World Bank, IFC, and MIGA staff to weigh in at an early stage of potential operations, the WSCA GCP is expected to help maximize potential PCE and PCM for the water sector. Operationalizing the One World Bank approach will entail the participation of IFC and MIGA teams in upstream engagement on World Bank operations, including “safe space” discussions, and the incorporation of WB teams and resources in IFC and MIGA engagements with the private sector. Notably, resources from the groups will need to be targeted to areas where they would add the most value and be critical to enable private sector investment and financing. In implementing a One WB approach, the team’s value proposition includes the following elements: 1. Ex-ante differentiation of countries where water sector operations are being contemplated. A region’s countries might be ex-ante categorized as having “reasonable,” “challenging,” or “very limited” potential for PCM in water. This categorization would be established by a working group representing the WB’s regional vice-presidencies. 2. IFC and MIGA would be apprised of new water engagements in countries with reasonable and challenging potential for PCM. 3. When a country’s water sector is deemed to have reasonable potential for PCM, IFC and MIGA resources would be deployed early on. In some of these countries, instruments such as WaterSAPs and JIPs would be used for diagnostic and operational planning purposes. 4. When potential for PCM is challenging, desirability of deploying IFC or MIGA resources will be assessed. 5. When potential for PCM is very limited, IFC or MIGA resources would likely not be deployed. 6. A tracking mechanism would be established for monitoring and knowledge learning purposes. This mechanism would include the indicators listed below. This tracking of intermediate as well as final results on PCE and PCM would enable senior management to assess progress on both OWB operationalization and mobilization of PCM in achieving member countries’ development objective . 7. The intermediate results and process indicators would be reviewed quarterly at the vice-presidential level and reported to managing directors. To further institutionalize collaboration of the Water GP, IFC, and MIGA, a quarterly director-level business review meeting has been established to discuss the pipeline of joint projects and to explore additional opportunities to maximize synergies among the three institutions. Suggested process indicators for corporate reporting Number of countries where: • Potential sector reform programs are under discussion by the WB and host governments. • IFC staff, MIGA staff, or both are actively involved, in reform discussions. • WB operations supporting sector reform programs have reached implementation. • IFC staff, MIGA staff, or both are actively involved, in a One World Bank approach, on implementation of WB operations supporting sector reforms. • Increased PCM is supporting achievement of sector development objectives. 26 Annex 1b: Theory of change: Fast Track Water Security and Climate Adaptation GCP 27 Annex 2: Tools that aid replicability and scalability Once impediments to water security have been identified, for example, through Water Security Diagnostics, specific tools can be applied to help clients address their identified constraints. Some of these tools are presented here: Scaling ReWater is a WB initiative to scale up sustainable wastewater treatment and reuse infrastructure as well as desalination projects by unlocking public and private finance using a programmatic approach. This program seeks to overcome limited institutional capacity for project preparation, lack of scale in local water treatment projects, the generally high transaction costs of individually negotiated contracts, and high risk perceived by the private sector. It brings together a suite of WB products and services, including transaction advice, simple and rapid tendering, standardized and balanced project documents, competitive financing and insurance, and risk management and credit enhancements. The program includes bankable project documents to reduce negotiation delays and templates designed to incentivize circular economy and resilience, mobilize hybrid (public, private) financing, and access concessional climate finance based on greenhouse gas and methane emissions reduction potential. It also includes advisory services to prepare projects, structure transactions, and attract strong competition from committed industry players. The Utility of the Future (UoF) developed user-friendly and gender sensitive tools and a methodology for utilities to drive transformation and continuous improvement, empowering utility staff and fostering ownership of change. Alongside UoF, tools such as Digital Prescriptions, Cybersecurity Maturity Model, and NewIBNET, a comprehensive database for water utilities’ operations and maintenance, hold potential for scaling across the entire water cycle. Utilities for Climate (U4C) is a new initiative designed to offer water utilities access to IFC’s advisory services, investment products, and knowledge-sharing partnerships. It is a demand-driven initiative focused on building client relationships with water utilities as they develop solutions to address climate change and boost commercial water infrastructure investment opportunities. Water in Circular Economy and Resilience (WICER): This report describes the key actions needed to achieve three main outcomes: (1) deliver resilient and inclusive services, (2) design out waste and pollution, and (3) preserve and regenerate natural systems. The initiative has developed case studies and compiled examples, guidelines, and other relevant materials. IFC Cities Platform: The IFC Sustainable Cities program assists subnational governments and private sector partners to attract investments and financing for urban infrastructure projects in a range of sectors, including transport, water, wastewater, solid waste, and district energy. The program helps urban municipalities implement their capital investment programs and mobilize commercial financing for their infrastructure projects through non-sovereign loans, municipal bonds, and PPPs. The Government of Switzerland is the anchor donor for this program. Since its launch in 2018, the program has facilitated $393 million in financing with some 1.7 million people benefitting from improved infrastructure services. Framework for Integrated Water Storage Planning: This systems-driven options assessment tool helps users evaluate approaches to filling the water storage gap, starting with the full range of choices — including demand management, alternative supply mechanisms, and storage —that may be required at the local level. The framework is organized in three stages: (1) a needs assessment to define the problem, (2) a definition of the system and potential solutions, and (3) a decision-making process that considers a range of scenarios and uncertainties. EPIC Response Framework: The framework provides tools to build climate resilience through integrated flood and drought risk management. It helps users prioritize, accelerate, and scale up response mechanisms, including innovative governance and risk management to navigate uncertainty, reduce duplication, promote inclusion and empowerment of women and excluded groups, make efficient use of public resources, and protect communities, economies, and ecosystems. 28 Equal Aqua: This platform promotes gender equality efforts by providing capacity building, technical assistance, diagnostics, peer-to-peer support, and benchmarking on increasing gender diversity in formal water institutions. It has contributed to tangible improvements in female representation in technical and leadership positions within these institutions. It works in tandem with partners that include utilities, water agencies, academia and the private sector. The Irrigation Operator of the Future (iOF) Toolkit: This toolkit offers support to irrigation operators to assess their performance, prioritize problems by using problem-driven approaches, and plan strategically and act decisively. Citywide Inclusive Sanitation CWIS: The World Bank’s Water Global Practice, in partnership with sector development partners (including The Bill & Melinda Gates Foundation, Emory University, The University of Leeds, WaterAid, and Plan International), have jointly developed and advanced an approach to tackling urban sanitation challenges. CWIS aims to shift the urban sanitation paradigm to ensure everyone has access to safely managed sanitation by promoting a range of solutions —both onsite and sewered, centralized or decentralized—tailored to the realities of the world's burgeoning cities. Irrigation performance assessment and benchmarking: Advances in and reduced costs for remote sensing allow measurement of irrigation performance (reliability, efficiency) at various scale (scheme, basin, region) and performance benchmarking. Farmer-led Irrigation Development (FLID) guide: The FLID guide has been created as a practical tool to help shape a new way of engaging in irrigation development with farmers, including the most vulnerable 80 percent smallholder farmers (less than two hectares). It encompasses a what, why, and how intervention design and is an indispensable resource for government teams and development partners working in the agricultural, water, and irrigation sector. Scaling Up Finance for Water: This publication is the first concerted effort by the World Bank, IBRD, IDA, IFC, and MIGA to jointly engage on programmatic- and project-level opportunities in the water sector, with the aim of unlocking private sector expertise, innovation, and capital. The framework provides a set of strategic directions and a customizable roadmap for the public sector, private sector, international organizations, intermediaries, and others to collaborate to catalyze financing and innovation for the water sector. It builds on the collective experience and knowledge of the World Bank and development partners to address barriers to mobilizing additional resources in the sector. Resilience for Water Tools: The World Bank has developed a range of approaches to plan, design, and manage resilience for improving investments and client dialogue (e.g., Decision Tree Framework, Resilient WSS Utility Roadmap, and Resilience Design Brief). Promoting Development in Shared River Basins: Tools for Enhancing Transboundary Basin Management: This report describes processes, risk mitigation measures, and benefit enhancement measures that can be used to increase cooperation and management of transboundary waters. The Water GP, in collaboration with HNP GP and the Global Financing Facility for Women, Children, and Adolescents (GFF), produced Operational Toolkit for WASH in Health Care Facilities and Schools to improve the quality and quantity of WASH investments in World Bank operations. The toolkit contains nine modules to support all aspects of implementation, with a focus on sustainability and effective use of WASH services. It incorporates considerations for gender, accessibility and inclusion and guidance on climate-resilient infrastructure and services. 29 Annex 3: Partnerships for Water Security and Climate Adaptation Cross-sectoral, intra-sectoral, and jurisdictional planning with key stakeholders are a key feature of this GCP, as they are essential for implementing water security and climate adaptation programs, sustaining water sector reforms, and promoting private sector participation and private capital mobilization. Water partnerships—at the regional, country, basin, or local level —will be upscaled to help mobilize public and private financing and can support a shared vision for the water sector among relevant stakeholders and can ensure transparency, trust, inclusivity, and accountability regarding the delivery of a jointly agreed framework of water sector goal. These partnerships take many shapes, including river basin organizations or regional economic communities charged with water management, cross-ministerial river basin committees, community cross-sectoral organizations, national-level water security platforms, public-private collaboration fora, or separate bodies formed to meet specific challenges. They include government, the private sector, civil society, academia, donors, and international organizations. WSCA will strengthen existing or support new water partnerships, to effectively deliver water security programs, overcome governance constraints to water security and service delivery, and create systems of incentives for improved water systems and service provider performance. These partnerships will be used to serve a number of functions, not limited to: • Articulate a shared vision for the water sector and a common understanding of the key challenges to achieve water security through deployment of joint analytics (e.g., Water Security Diagnostics, CCDRs, and WaterSAPs) for evidence-based decision-making and structured M&E systems. • Assess the enabling environment and needed PIR reforms and foster commitment from government and other partners to endorse a long-term water security vision and implement the required reforms. • Support alignment of sectors and stakeholders, comprising water, agriculture, urban development, climate, rural development, finance, environment, industries, and commerce, as well as intra-sectoral coordination across water subsectors to promote water security outcomes. • Identify concrete programs and projects through strategic financial planning and systematic water resources planning to drive water security and resilience to climate impacts. • Support, in coordination with other multilateral agencies, development partners, and financial institutions, a programmatic approach for mobilization of financing. • Advance innovations by identifying new solutions, approaches, and technologies. • Exchange knowledge on all aspects of water security and financing solutions. • Mobilize investors and financiers to match the supply of capital with the demands of the sector, including identification of financial tools to reduce lenders’ risks and borrowers’ constraints. • Monitor implementation of projects and programs on water security and specific sector objectives. Water partnerships can be used to overcome obstacles to PPPs and finance facilitation. In the past, instruments to support flows of private finance to creditworthy entities and bankable projects in the sector have on occasion been undermined by the availability of concessional finance. Structured dialogue among development partners and financiers in a country partnership would reinforce commitment to crowding in commercial finance, wherever possible, and directing concessional funds where they are most needed, particularly to protect the poor and vulnerable populations. Moreover, participation of the ministries of planning, economy, and finance in the water agenda is critical to improve national water investment planning and policymaking. Within the World Bank, the 2030 Water Resources Group (2030 WRG) has championed this approach, including in Bangladesh, Brazil, India, Kenya, and Peru, as has the Water Global Practice (e.g., through water security platforms in Bangladesh and Nepal and through the One WASH Program in Ethiopia). 30 Annex 4: Concessional Financing in Private Sector Operations Blending public funds (including from governments, the WB, IFIs and MDBs, and other donors) and private capital has an important role in expanding water services. One aspect, which may not be intuitively obvious, is the link between availability of these public funds, provided to private sector operations at concessional terms (concessional financing) on the one hand, and PCM on the other. The gap between the costs of providing water services and revenues from user charges is far wider in water and sanitation than in other infrastructure sectors. This gap causes most sector utilities to be non- creditworthy, preventing them from mobilizing private capital to support their investment programs. Some key policy choices to address this lack of financial sustainability include (a) improving revenues through tariff increases and improving utility operational efficiency and financial management, (b) use of guarantees to assure providers of private capital that governments (or other credit-worthy entities) will make good on utilities’ financial shortfalls, and (c) use of external concessional financing. All three of these policy choices face important constraints: affordability concerns hinder the ability of governments to see through significant tariff increases, utility financial gaps are often too large to be fully covered by guarantee products, and availability of concessional financing is limited. Therefore, all three of these policy instruments need to work in concert to provide a basis for PCM. Systematic use of concessional financing will be key to mobilize private sector capital and expertise. The rationale underpinning its use in private sector operations is threefold: • Affordability: Access to clean water and sanitation carries significant positive externalities that cannot always be reflected in end-user tariffs. Affordability justifies concessional financing to reduce these. • Climate adaptation: Only 4 percent of global climate finance went to the water sector in 2019–2020.8 Changing weather patterns are forcing countries to source more expensive water (e.g., desalination) and to build additional resilience in their systems to manage droughts and floods. But LMICs, which already struggle to reach SDG6, can hardly afford these additional costs. • Transitional: The water sector has not been as successful as others in attracting private sector participation. Doing so will take time, and investments are urgently needed. Concessional financing can accelerate crowding in private solutions while longer-term sector reforms are carried forward. Examples of how concessional finance could be deployed: • Support water utilities to increase investments in climate resilient infrastructure : By providing concessional corporate loans, water utilities currently relying on central government transfers can free up macro-fiscal space at the sovereign level while also increasing investments in climate-smart water infrastructure. The WB’s Indonesia National Urban Water Supply Project adopted a framework wherein the WB provides a matching grant to utilities that leverage their balance sheets and access commercial financing sources without sovereign backing. • Close the investment gap by increasing adoption of PPPs: Countries embarking on large desalination programs, such as Azerbaijan, the Arab Republic of Egypt, Morocco, and Senegal, will require viability gap funding to keep retail tariffs affordable. Similarly, more wastewater treatment PPPs are needed to protect freshwater resources and biodiversity, but sanitation tariffs are too low to cover for their cost. Concessional loans, like those being considered for Namangan WWTP in Uzbekistan, can help. • Implement more efficient irrigation: Support farmers in switching to more efficient drip irrigation by setting up a first loss facility with local financial banks that would provide loans for the investments required. IFC is working on the CMGP transaction (46178) in Morocco, where a proposed $15.5 million risk-sharing facility that is under development would provide a model for further scale up in the Sahel and Maghreb regions. 31