Citywide Inclusive Sanitation Part 2: Long-Term Financing of Water Supply and Sanitation Projects
Summary
TLDRThe video script addresses the urgent need for innovative sanitation solutions in urban areas, emphasizing the challenges of managing water and sanitation amidst growing populations. It introduces 'City-Wide Inclusive Sanitation' (C-WISE), an approach that involves all stakeholders and considers unconventional technical solutions. The script discusses the financial complexities of sanitation projects, the importance of local knowledge and partnerships, and various financing mechanisms like blended finance and outcome-based instruments. It also highlights the role of public-private partnerships and the potential of innovative solutions like the Jokaso system for wastewater treatment. The script concludes by underscoring the importance of a comprehensive, collaborative approach to achieve sustainable sanitation by 2030.
Takeaways
- 🌍 By 2030, nearly half of the global population still lacks access to safely managed sanitation, despite global efforts to ensure availability and sustainable management of water and sanitation for all.
- 🏙️ 'City-wide inclusive sanitation' or C-WISE is an approach that considers technical solutions beyond conventional sanitation systems and works closely with all stakeholders to create an enabling environment for the entire service chain.
- 💡 Sanitation projects are complex due to geographical distribution, fragmented governance, and overlapping mandates among various government agencies, which hampers effective planning, coordination, and management.
- 🏡 Addressing household ability or willingness to pay for sanitation services is crucial, as poor unit economics and the need for subsidization are realities of the sector.
- 🌐 High operating expenses, local partnerships, and expertise increase counterparty risks when international financing is mobilized for sanitation, making investments vulnerable to exchange rates and macro risks.
- 🏛️ The potential for education and capacity development programs is highlighted as a way to bring projects to the forefront and develop or support public counterparties.
- 💼 The importance of local knowledge in the sanitation sector is emphasized, allowing for innovation at the local level with the flexibility required from investments.
- 💵 Blended finance is introduced as a strategic use of development finance to mobilize commercial capital towards projects contributing to sustainable development, making projects more attractive to private investors by absorbing much of the risk.
- 🌱 Impact investing, which uses investment capital to actively contribute to improvements in people's lives and the environment, could help fill the gap in financing for sanitation projects.
- 🔄 Public-Private Partnerships (PPPs) can efficiently manage and assign risks between the public and private sectors, introducing innovative and high-quality services from the private sector.
Q & A
What is the global challenge regarding water and sanitation management in cities?
-The global challenge is managing water and sanitation in expanding cities with higher population densities, where nearly half of the global population still lacks access to safely managed sanitation.
What is the goal set by global efforts for water and sanitation by 2030?
-The goal is to ensure the availability and sustainable management of water and sanitation for all by 2030.
What is the City-Wide Inclusive Sanitation (C-WISE) approach and how does it differ from conventional sanitation systems?
-C-WISE is an approach that considers technical solutions beyond conventional sanitation systems and works closely with all stakeholders to create an enabling environment for the entire service chain.
Why is the sanitation sector tied to people, place, and politics, making it a financial puzzle?
-Sanitation is tied to these factors because it involves geographically distributed projects with fragmented governance, overlapping and ambiguous mandates, which hampers effective planning, coordination, and management.
What are the financial realities of the sanitation sector that pose challenges?
-The financial realities include high operating expenses, the need for local partnerships and expertise, and the need for subsidization due to poor unit economics.
How does the investment in sanitation projects face risks such as exchange rates and macro risks?
-Investments in sanitation are exposed to unfavorable moves in exchange rates and are vulnerable to macro risks like political or civil unrest and changes in monetary policies.
What role can education and capacity development programs play in the sanitation sector?
-Education and capacity development programs can help bubble up project opportunities and create regional coordination, bringing projects to the forefront and fostering local knowledge and innovation.
What is blended finance and how does it help in mobilizing resources for sanitation projects?
-Blended finance is the strategic use of development finance to mobilize commercial capital towards projects contributing to sustainable development. It makes projects more attractive to private investors by having concessional funding absorb much of the risk.
How does the Development Impact Bond (DIB) work in the context of the sanitation sector?
-A DIB is a results-based financing instrument involving an impact investor, an implementing organization, an evaluator, and an outcomes funder. The outcomes funder repays the impact investor only if pre-agreed outcomes are achieved.
What are the benefits of Public-Private Partnerships (PPPs) in the delivery of sanitation projects?
-PPPs can deliver projects on time and within budget, introduce innovative and high-quality services from the private sector, and lower coordination costs through a bundling effect.
How does the private sector contribute to the sanitation market, and what is an example of an innovative solution they provide?
-The private sector contributes by delivering product solutions like the Jokaso on-site sewage treatment system, which treats all domestic wastewater more effectively than traditional septic tanks.
Why is collaboration and cooperation between countries essential in addressing the sanitation puzzle?
-Collaboration is essential because the issues in the sanitation sector are multi-layered and connected, requiring simultaneous problem-solving and coordination across different layers and sectors.
Outlines
🌎 Urban Sanitation Challenges and Innovative Solutions
This paragraph discusses the increasing difficulty of managing water and sanitation in expanding cities due to higher population densities. It highlights the global goal of ensuring availability and sustainable management of water and sanitation for all by 2030, but points out that nearly half of the global population still lacks access to safely managed sanitation. The paragraph introduces the concept of City-Wide Inclusive Sanitation (C-Wise), an approach that considers technical solutions beyond conventional systems and involves all stakeholders to create an enabling environment for the entire service chain. It also touches on the financial challenges of the sanitation sector, including the need for new institutions and laws, the reality of poor unit economics, and the risks associated with international financing.
💼 Financing Sanitation: Blended Finance and Public-Private Partnerships
The second paragraph delves into the financial mechanisms needed to achieve the goal of safely managed sanitation for all. It explains the concept of blended finance, which uses development finance to mobilize commercial capital towards sustainable development projects. The paragraph emphasizes the importance of early project development, institutional design, and direct catalyzation of private capital. It also discusses the role of Official Development Assistance (ODA) and the potential of the global impact investment market to fill the financing gap. The paragraph introduces the Development Impact Bond (DIB) as a results-based financing instrument and provides an example of its successful implementation in Cambodia. Additionally, it explores the benefits of Public-Private Partnerships (PPPs) in delivering projects on time and within budget, and the importance of capacity building and local problem-solving in achieving sustainable sanitation.
🌱 Sustainability and Innovation in Sanitation Solutions
The final paragraph focuses on the role of the private sector in delivering product solutions to the sanitation market, such as the Jokaso on-site sewage treatment system. It discusses the importance of promoting awareness and education among communities for the sustained maintenance of sanitation facilities. The paragraph also highlights the role of sanitation in building climate adaptation and mitigation efforts, and the potential of multilateral environment funds to support water and sanitation projects. It concludes by emphasizing the complexity of the sanitation puzzle and the need for a comprehensive system that coordinates multiple layers of problem-solving, technical assistance, and finance to achieve the goal of safely managed sanitation.
Mindmap
Keywords
💡Sanitation
💡C-WISE
💡Fragmented Governance
💡Subsidization
💡Counterparty Risks
💡Blended Finance
💡Impact Investing
💡Development Impact Bond (DIB)
💡Public-Private Partnerships (PPPs)
💡Capacity Building
💡Climate Adaptation
Highlights
The management of water and sanitation is increasingly challenging in expanding cities.
Nearly half of the global population lacks access to safely managed sanitation.
City-wide inclusive sanitation (C-WISE) promotes tailored solutions and works with stakeholders.
Sanitation is a complex sector due to fragmented governance and overlapping responsibilities.
Investments in sanitation require addressing household ability and willingness to pay.
High operating expenses and local partnerships increase counterparty risks in sanitation projects.
Blended finance can mobilize commercial capital for sustainable development projects.
Development Impact Bonds (DIBs) are a results-based financing instrument for social programs.
Public-Private Partnerships (PPPs) can efficiently manage and assign risks in sanitation projects.
Capacity building is crucial for fostering sustainability in sanitation.
The private sector brings innovation and efficiency to the sanitation market.
Jokaso is an innovative on-site sewage treatment system that treats all domestic wastewater.
Sanitation plays a key role in climate adaptation and mitigation efforts.
Multilateral environment funds can be mobilized to address water and sanitation issues.
Citywide inclusive sanitation aims to create a comprehensive system to tackle sanitation challenges.
Sanitation solutions require simultaneous problem-solving across multiple layers.
Innovation, open-mindedness, and collaboration are key to addressing global sanitation challenges.
Transcripts
[Music]
in our ever-expanding cities higher
population densities are making the
management of water and sanitation ever
more challenging
despite global efforts to ensure the
availability and sustainable management
of water and sanitation for all by 2030
nearly half of the global population
still lacks access to safely managed
sanitation
with less than a decade to 2030 it's
time for business unusual a new approach
to urban sanitation that promotes
methods and innovations tailored to the
specific realities of a given city
city-wide inclusive sanitation or c-wise
is such an approach
one that considers technical solutions
beyond conventional sanitation systems
and works closely with all stakeholders
to create an enabling environment for
the entire service chain
because of its comprehensive scope
c-wise requires an extraordinary level
of investment to scale globally
one would think that the business of
water and sanitation essential to human
life and part of everyday living would
be an easy sell
but sanitation is tied to people place
and politics thus posing a financial
puzzle
[Music]
the solution to sanitation is complex
because most sanitation projects are
geographically distributed the sector is
characterized by fragmented governance
various government agencies often have
mandates and responsibilities that
overlap and are ambiguous
this hampers effective planning
coordination and management
for an investment to work there's a need
to change or establish new institutions
and implement new laws
to bring safely managed sanitation to
underserved communities we must address
a household's ability or willingness to
pay making poor unit economics and the
need for subsidization a reality of the
sector
in the sanitation sector
it's particularly relevant right the
most knowledge about what the community
needs and what investments will work
well most of that knowledge is local
high operating expenses coupled with a
need for local partnerships and
expertise increase counterparty risks
when international financing is
mobilized for sanitation the investment
is exposed to unfavorable moves in
exchange rates it is also vulnerable to
macro risks such as political or civil
unrest and changes in monetary policies
given these characteristics of
sanitation long-term investments are
needed requiring higher order
intermediation i wanted to mention the
potential for education and capacity
development programs is a process
through which project opportunities can
kind of bubble up right regional
coordination the creation of education
and capacity development programs really
can kind of bring projects to the floor
i think developing
or supporting public counterparties is
crucial
i also think screening for those
challenges
is something that the intermediary could
could kind of bring to the table right
when there is a counterparty or when
there's a serious issue with the
counterparties to bring those issues
identify bottlenecks
and bring those to the surface the
importance of local knowledge uh in this
sector
to allow that innovation at the local
level and that flexibility right when we
talk about innovation we're really
talking about flexibility with the
standardization that's required from the
investment
that's what an intermediary does that's
what a middleman that's the value
created by a middleman and so there's an
opportunity for
finding that appropriate balance
although sanitation projects have been
largely financed with public sector
investments the public sector alone
cannot fill the gap
projections of global financing needs
for water infrastructure range from 6.7
trillion us dollars by 2030 to 22.6
trillion us dollars by 2050.
to make safely managed sanitation a
reality for everyone everywhere we need
to explore various financial mechanisms
blended finance is the strategic use of
development finance to mobilize
commercial capital towards projects that
contribute to sustainable development
by having concessional funding absorb
much of the risk the project is more
attractive to private investors who
require lower risk and seek market rate
returns
blended finance is most effective where
it's measurable and can maximize impact
it is measurable when used in early
project development institutional design
or to catalyze private capital directly
it is impactful when it addresses
barriers to capital markets through
transaction costs risk allocation
technology risk and credit enhancement
there always has to be an eye towards
not needing
uh blended capital in the future right
becoming financially sustainable or
economically sustainable and getting to
that point that's always part of the
development process
for decades official development
assistance or oda has been an important
source of development financing helping
startup projects in sectors or areas
that have been left behind
but in recent years oda disbursements to
the water sector have become stagnant
remaining stable at 8.8 billion us
dollars from 2015 to 2019.
the global impact investment market
estimated to be at 715 billion us
dollars could help fill the gap impact
investing is an approach used by
investors to harness the power of their
investment capital to actively
contribute to improvements in people's
lives and the health of environment
the financial markets needs clarity
unexpected impact transparency along
performance data will be very important
my personal idea is that outcome
oriented type of supports such as
result-based financing
development impact bond a development
impact bond or dib is a results-based
financing instrument that involves the
impact investor who provides working
capital for a social program
the implementing organization who
provides the service
the evaluator who independently verifies
results and provides an outcome report
and the outcomes funder who repays the
impact investor but only if pre-agreed
outcomes are achieved
this results-based approach motivates
the impact investor and the implementing
organization to work closely to achieve
outcomes
focusing on results also gives the
implementer more room for innovation and
local problem solving
the cambodia rural sanitation dib is the
world's first development impact bond
for the wash sector
to eradicate open defecation the
outcomes funder will make an outcome
payment for each village in the program
that achieves open defecation free
status a little over a year into
implementation 500 villages have
achieved open defecation free status
nearly 89 000 households have confirmed
access to sanitation
and the outcomes funder has made more
than 3 million us dollars in outcomes
payments
[Music]
the delivery of the components of
public-private partnerships or ppps are
bundled in order to efficiently manage
and assign risks between the public and
private sectors
the benefits of ppp include on time and
within budget project delivery
this partnership also introduces
innovative and high quality services
from the private sector with a bundling
effect lowering coordination costs to
increase a share of ppp
it is recommended to promote branded
finance or utilize development
institutions concessional loans
effectively in order to incentivize both
public and private to mobilize ppp
projects
we've had incredibly
good success in our public private
partnerships for us that's really around
how do we think about buying down our
risk as a private sector partner and
establishing
a more market-based supply chain
establishing a sustainable market
approach it's really around developing
more of a sustainable way of doing
things less some of this project way of
doing things
a significant element of fostering
sustainability is capacity building the
training of stakeholders on the ground
to do things right
mason's plumbers local entrepreneurs you
know we're exploring multiple different
business models how do we empower those
last mile
agents to really advocate for sanitation
and hygiene give them the tools to do
that efficiently and reliably
sustainable and safely managed
sanitation goes beyond installation
it extends to the proper operation and
maintenance of facilities and this is
where local governments are called upon
to promote awareness and education among
communities
we can't just install
you know toilets and schools and
institutions and in households and not
advocate for their sustained maintenance
we need to partner with the public
sector to think about how we as
suppliers
of more effective and affordable and
aspirational toilet and
hygiene solutions
can get these products and access but we
have to solve that for the long term if
we're going to get to the safely managed
sanitation goal i mean there's unique
capabilities the private sector brings
in terms of the ability to move fast
bring innovation think about supply
chains think about efficiency and think
about long-term sustainability and
there's a eagerness to partner
private enterprises have a lot to bring
to the table
one of their most significant roles is
delivering product solutions to the
sanitation market
one such solution is a japanese
innovation jokason an on-site sewage
treatment system yokoso is completely
different from septic tank
which treats only black water or toilet
with water
yoga so can treat all domestic waste
water such as from kitchen toilets baths
laundry etc
yoga saw has both anaerobic and aerobic
treatment and it can decompose organic
cyber sciences faster and better than
septic tanks
while the jokoso system may be too
expensive for most households in
developing countries it could still
serve other needs in the market that is
the needs for commercial buildings one
side of the total research of wastewater
in jakarta comes from commercial river
so that is i think the conversation in
developing countries to improve the
management of the wastewater for these
commercial buildings are very important
while tides and currents nurture life
they are also capable of destruction and
the least developed countries have
suffered the brunt of it sanitation
plays an essential role in building
climate adaptation and mitigation
efforts
flood and drought management makes
cities more resilient while wastewater
treatment and recycling help protect
ecosystems and increase food security in
response to the escalating impacts of
climate change numerous multilateral
environment funds can be mobilized for
water and sanitation
and because climate change knows no
borders collaboration and cooperation
between countries is essential
the puzzle of sanitation is undeniably
complex raising challenges not only in
financing but in political social and
environmental areas as well
these scattered pieces of this puzzle
need to come together in a comprehensive
system
this is what citywide inclusive
sanitation hopes to be these issues in
this sanitation sector both uh
on site as well as are connected
is difficult
because it's multi-layered and we have
to do simultaneous problem solving in
designing the best market structure or
institution for each layer and yet
coordinate everything and we cannot jump
to project we cannot jump to technical
assistance or finance without solving
this set of equations
unraveling the complexities of
sanitation creates both questions and
answers
as 20 30 looms we must face them with an
even greater sense of urgency
it's an uphill battle
but consider what mankind has achieved
through innovation
open-mindedness and collaboration
when we approach the problems of
sanitation not from our little corner of
the world but as a united front
better ideas
systems and solutions can truly flow
[Music]
[Music]
you
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