【世界银行】水务部门支持干旱风险管理的金融工具-2025

PublicDisclosureAuthorizedPublicDisclosureAuthorized

WORKINGPAPERGLOBALDEPARTMENTFORWATER

FinancialToolsforthe

WaterSectortoSupportDroughtRiskManagement

PublicDisclosureAuthorizedPublicDisclosureAuthorized

HilaCohenMizrav,MarkusEnenkel,andNathanL.Engle

AbouttheGlobalDepartmentforWater

TheWorldBankGroup’sGlobalDepartmentforWaterbringstogetherfinancing,knowledge,andimplementationinoneplatform.BycombiningtheBank’sglobalknowledgewithcountryinvest-ments,thismodelgeneratesmorefirepowerfortransformationalsolutionstohelpcountriesgrowsustainably.

Pleasevisitusat

/water

orfollowusonX:

@WorldBankWater

.

AboutGWSP

ThispublicationreceivedthesupportoftheGlobalWaterSecurity&SanitationPartnership(GWSP).GWSPisamultidonortrustfundadministeredbytheWorldBank’sGlobalDepartmentforWater

andsupportedbyAustralia’sDepartmentofForeignAffairsandTrade;Austria’sFederalMinistry

ofFinance;Denmark’sMinistryofForeignAffairs;theNetherlands’MinistryofForeignAffairs,the

GatesFoundation;Spain’sMinistryofEconomicAffairsandDigitalTransformation;theSwedish

InternationalDevelopmentCooperationAgency,Switzerland’sStateSecretariatforEconomicAffairs;theSwissAgencyforDevelopmentandCooperation;theUnitedKingdomForeign,CommonwealthandDevelopmentOffice;andtheUnitedStatesAgencyforInternationalDevelopment.

Pleasevisitusat

/gwsp

orfollowusonX:

@TheGwsp

.

FinancialToolsfortheWaterSectortoSupportDroughtRiskManagement

WORKINGPAPER

HilaCohenMizrav,MarkusEnenkel,andNathanL.Engle

WORLDBANKGROUP

©2025InternationalBankforReconstructionandDevelopment/TheWorldBank

1818HStreetNW

WashingtonDC20433

Telephone:202-473-1000

Internet:

ThisworkisaproductofthestaffofTheWorldBankwithexternalcontributions.Thefindings,interpretations,andconclusionsexpressedinthisworkdonotnecessarilyreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthegovernmentstheyrepresent.

TheWorldBankdoesnotguaranteetheaccuracy,completeness,orcurrencyofthedata

includedinthisworkanddoesnotassumeresponsibilityforanyerrors,omissions,or

discrepanciesintheinformation,orliabilitywithrespecttotheuseoforfailuretouse

theinformation,methods,processes,orconclusionssetforth.Theboundaries,colors,

denominations,links/footnotesandotherinformationshowninthisworkdonotimplyany

judgmentonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryorthe

endorsementoracceptanceofsuchboundaries.ThecitationofworksauthoredbyothersdoesnotmeantheWorldBankendorsestheviewsexpressedbythoseauthorsorthecontentoftheirworks.

NothinghereinshallconstituteorbeconstruedorconsideredtobealimitationuponorwaiveroftheprivilegesandimmunitiesofTheWorldBank,allofwhicharespecificallyreserved.

RightsandPermissions

Thematerialinthisworkissubjecttocopyright.BecauseTheWorldBankencouragesdisseminationofitsknowledge,thisworkmaybereproduced,inwholeorinpart,fornoncommercialpurposesaslongasfullattributiontothisworkisgiven.

Anyqueriesonrightsandlicenses,includingsubsidiaryrights,shouldbeaddressedtoWorldBankPublications,TheWorldBankGroup,1818HStreetNW,Washington,DC20433,USA;

fax:202-522-2625;e-mail:

pubrights@

.

Coverphoto:AdobeStock.Furtherpermissionrequiredforreuse.

Coverdesign:BillPragluski,CriticalStages,LLC.

CoNTENTS

Contents

ExecutiveSummaryv

Abbreviationsviii

1.Overview1

ImpactsonDifferentStakeholders3

TheFinancingGap4

Meso-LevelApproach6

Note6

2.ReviewofExistingFinancingInstruments7

TheRoleofRiskRetention9

RiskLayeringandAffordability9

Insurance11

CreditandContingentFinancing12

Notes14

3.SelectedFinancialMechanismsWorthExploringforMeso-LevelWaterStakeholders15

HighlightedFinancialToolsforMeso-LevelStakeholders16

TheExpandedCrisisPreparednessandResponseToolkit20

Notes21

4.UseCasesforSelectedMeso-LevelStakeholders22

Beneficiary:WaterProvider23

Beneficiary:IrrigationAssociation23

Beneficiary:Reservoiroperator23

5.MainTakeawaysandaWayForward25

FinancialInstrumentsCanTargetResilienceandShockProtection26

RiskownershipandTransparentModelsAreVital26

TailoredFinancialInstrumentsCanCloseCriticalGapsattheMesoLevel26

EffectiveAdaptationofDroughtFinanceToolsVariesbyRegionandContext26

ExistingRiskPoolsCanBeExtendedtoCoverDroughtRisk27

EvolvingFrameworksIntegrateDroughtandFloodRiskManagement27

MovingForward27

References32

FINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENTiii

ivFINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENT

CoNTENTS

Boxes

ParametricProtectionagainstFloodsforLow-IncomeCommunities10

CaseStudy:Kenya—MixofInstrumentstoFinanceDroughtRisk13

CaseStudy:TheCaribbeanCatastropheRiskInsuranceFacility18

CaseStudy:Colombia’sCoVID-19Response19

Figures

FigureES.1PositioningofMeso-LevelRiskFinancingfortheWaterSectorvi

Figure1.1DroughtEventsandEstimatedPopulationAffectedReportedtoEM-DATbetweenJanuary2000

andSeptember20242

Figure2.1overviewofSourcesofFinance8

Figure2.2Ex-Antevs.Ex-PostFinance(NoCosts)9

Figure2.3DisasterRiskLayeringoptionsforDifferentReturnPeriodsandSeverityLevels10

Figure3.1PositioningofMeso-LevelRiskFinanceInstrumentstoComplementMicro-andMacro-LevelInstruments17

Figure3.2TheFiveMainComponentsoftheWorldBankExpandedCrisisPreparednessandResponseToolkit21

Table

Table5.1DroughtFinancialToolsSummaryTable—TraditionalApplications28

ExecutiveSummary

D

roughtshavebeendescribedasacreeping,slow-onsethazard.Inparallel,however,climatechangewillincreasethefrequencyofflashdroughts,whichcandevelopveryrapidly,sometimeswithinamatterofdaystoweeks(yuanetal.2023).BasedonananalysisofdisasterstatisticsfromEM-DAT,theInternationalDisasterDatabase,covering2000toSeptember2024,thenumberofgloballyreportedfloodevents(4092)isalmosttentimeshigherthanthenumberofreporteddroughtevents(406).However,

themediannumberofpeopleaffectedperdroughtevent

ishigherthanforfloods(11,807versus11,556).Research

findingsindicatethatbothhumanandeconomiclosses

relatedtodroughtaremuchgreaterthancurrentlycapturedinglobaldisasterstatistics(Jonesetal.2023,Enenkel,

Guha-Sapir,andZaitchik2024).Inaddition,droughtscan

havemassiveadverseeffectsonannualgrossdomestic

product(GDP)growthratesinlow-incomecountries,rangingfrom0.39percentformoderateto0.85percentforextremedroughts(Zaveri,Damania,andEngle2023).

Globally,directdrought-relatedimpactsmainlyoccurin

theagricultural,hydropower,andindustrialsectors,but

cascadingeffectsincludehealthissuestriggeredbyalack

ofsanitation,childstunting,humandisplacements,lossof

socialties,andmigrationtounsafesettlements(IPCC2022).1

Despitetheexistenceofadvanceddroughtriskmonitoring

andforecastingsystems,droughtsaregenerallystill

associatedwithalowlevelofpreparedness,andfewertoolsareavailableincomparisontofloods.

2

Evenwhenearly

warningsystemsareinplace,households,farmers,and

businessesoftenlackthefinancialtoolstomitigatethese

risks.Droughtriskfinanceinstrumentshavethepotential

topreventemergenciesfromturningintofull-blowncrises

thatjeopardizehard-earneddevelopmentgains,ifthe

necessarypreparednessinstrumentsandadaptivesocial

protectionmechanismsareinplace.Simultaneously,more

predictable,pre-agreedfundingcanincreasetheefficiencyofriskmitigationactivitiesduringthedroughtonsetphase,

reducingtheneedforcostlyemergencyresponse.Giventheexistinggapinfinancialtoolsfordroughtriskmanagement,countriesmustthinkcreatively,withtheneedsofaffected

communitiesinmind,abouthowtoreorientexistingfundingsourcestowardfast,moreefficientmitigationandresponsewhiletappingintonewresourcesthatcatalyzeinvestmentbyhouseholdsandfirms(UNCCDGlobalMechanism2021).

Thisdiscussionpaperprovidesanoverviewofvarious

financialtoolscommonlyusedforglobalclimatefinancing.Buildingupontheexistingtoolsforclimateanddisaster

finance,itexploresthepotentialofsupportingthewater

ExECUTIVESUMMARy

v

FINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENT

FIGUREES.1

PositioningofMeso-LevelRiskFinancingfortheWaterSector

Micro

Scale

Macro

Meso

Agriculture,

socialprotection

Nationalfiscal/budgetsector

Waterresource

Potentialsectors

management

Waterutilities,

Households,farmers,communities

Governments,

humanitarianpartners

Potentialbeneficiaries

irrigationandriverbasin

managementorganizations,

reservoiroperators

sectorinclientcountriestobridgethecriticalgapbetweenmicro-andmacro-levelinstrumentswithameso-level

approach(figureES.1).Asmostattentionisgiventofinancialtoolsforthemacro(country)levelorthemicrolevel(most

commonlydevelopedforfarmers,communities,orsmallbusiness)thispaperfocusesonwaysinwhichdrought

riskcanbereducedthroughinterventionsundertakenby

stakeholders,suchaswaterutilities,irrigationproviders,andreservoiroperators.

Inthemeso-levelcontext,creditworthinessisacrucialfactor,especiallyforwaterproviders,andshouldbeapriority

forbuildingdroughtresilience.Theconceptreferstothe

utility’sabilitytodemonstratefinancialstrengthandfulfill

debtrepaymentobligations(WorldBank2023).Assessing

creditworthinessallowslenderstodeterminethefinancial

viabilityofwaterprovidersandoffersuitablefinancial

instrumentstorespondtoandpreparefordroughts.The

toolspresentedinthispapercanprovideanadditionallayerofsupportbeyondcreditworthinesstohelpwaterservice

providersprepareforandrespondtotheenvironmentalandsocioeconomiceffectsofdroughts.

Thispaperexploresthechallengesobstructingdroughtriskfinancingandhighlightsgapsatthemesolevel.Itproposesadaptationstoexistingtoolsandtheintroductionofpotential

newinstrumentstailoredtotheneedsofmeso-level

stakeholders.Sincemanyoftheseinstrumentshaveyettobeimplementedincollaborationwithwaterserviceproviders,

asfarastheauthorsareaware,thispaperaimstostimulatefurtherexplorationinthisarea.

Accordingtotheliteraturereviewconductedforthisworkingpaper,

3

thesearesomeofthemostpromisingriskfinance

instrumentsthathavebeenorcouldbeadaptedformeso-levelstakeholders:

■Riskpoolsforwaterproviders–Thisinsurance

mechanismcanpotentiallyhelpwaterproviders

significantlyreducethecostofmanagingfinancialrisk.

■Newoperationaldroughttools–Theseincludea

componentinaProgram-for-Results(PforR)project

forcapacitybuildingandimprovedefficiencyandthe

ContingencyEmergencyResponseComponent(CERC)toprovideimmediateliquidity.

■Risk-contingentcredit/revolvingfund–Thistypeofloanallowsutilitiestodrawfundsuptoalimit,repaythematwill,andredrawthem,ifnecessary,during

responseeffort,andcanbetriggeredbyobjectivemetrics,suchasrainfall.

ExECUTIVESUMMARy

vi

FINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENT

■Matchinggrantsandrecoverablegrants–Matchingandrecoverablegrantscanbeusedtoincentivize

irrigationusergroupsandwaterproviderstomakeproductiveinvestmentsinmore-efficientwaterandsanitationprocessesandinfrastructure.

■Catastrophebonds–Catastrophebondscanbe

triggeredrelatedtoseveredroughtshocks.Theycanbestructuredtopayoutbasedonspecificpredefineddroughtconditionsandprovideimmediateliquidity

tothebeneficiaries(therebyensuringoperationalcontinuity).Catastrophebondsfocusonlowreturnperiods(thatis,themostextremeevents).

■Riskpoolsfortransboundarywaterneeds–Whilenotdirectlywithinthemesolevel,thecross-borderimpactsofdroughtpresentanopportunitytoenhancetheuseofriskpoolstomitigateinvestmentrisksintransboundarycontexts.

Theuseofthesefinancialtoolsiscontext-specificand

dependsonmanyfactors,includingtheregulatory

environmentinthecountryorregion.Meso-leveldroughtriskfinanceapplicationsneedtobecodesignedwithwaterserviceproviderstomaximizetheirpracticaladdedvalue,prioritizingstakeholderbuy-inandpotentialuptakeviathedevelopmentoftransparent,data-drivensolutions.

ExECUTIVESUMMARy

Notes

1

.DataarefromEM-DAT,theInternationalDisasterDatabase,CentreforResearchontheEpidemiologyofDisasters,Brussels,Belgium,oct17,2024,

www.emdat.be

.

2

.TheEarlyWarningforAllInitiativeoftheUnitedNationsWorldMeteorologicalorganization(WMo)aimstoensurethateveryoneonEarthisprotectedfromweatherandclimateshocksthroughlife-savingearlywarningsystemsbytheendof2027.

3

.Theteamreliedonliteraturereviewasapreliminarystepbutisintheprocessofapproachingdifferentstakeholdersandoperationalpartnerstofurthervalidatethesuggestionspresentedinthispaper.

FINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENT

vii

ABBREVIATIoNS

Abbreviations

ARC

AfricanRiskCapacity

EPA

EnvironmentalProtectionAgency

CCRIF

CaribbeanCatastropheRiskInsuranceFacility

GDP

GrossDomesticProduct

CERC

ContingencyEmergencyResponseComponent

IPF

KAIP

InvestmentProjectFinancing

KenyaAgriculturalInsuranceProgramme

CERP

ContingentEmergencyResponseProject

NDEF

NationalDroughtEmergencyFund

DDo

DeferredDrawdownoption

PCRIF

PacificCatastrophicRiskInsuranceCompany

DPF

DevelopmentPolicyFinancing

PforR

Program-for-Results

DRIVE

De-risking,InclusionandValueEnhancementofPastoralEconomiesintheHornofAfrica

RBo

SEADRIF

RiverBasinorganization

SoutheastAsiaDisasterRiskFacility

viii

FINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENT

1.

Overview

2FINANCIALTooLSFoRTHEWATERSECToRToSUPPoRTDRoUGHTRISKMANAGEMENT

oftenacomplexchallengewithfar-reaching

socioeconomicconsequences.Climatechange

D

roughtisanaturalpartoftheclimateand

islikelytoresultinmorerapidonsetandintensificationof

droughtseverity(Trenberthetal.2014).Amidthecontinuingdebatewithintheresearchcommunityoverauniversally

accepteddefinitionofdrought(Lloyd-Hughes2013),itis

generallydefinedamongpractitionersasanexceptional

deficiencyofprecipitation(orflow)thatoftenresultsina

watershortagefortheenvironmentorsociety(IDMPn.d.).

Socioeconomicdroughtimpactscoverawiderangeofdirectandindirectshocks.Althoughthereissubstantialresearch

onthedirectimpactofdroughts,indirectlong-termeffects

remainunderstudied.Thereisahighriskthatchildren

(particularlygirls)whowereexposedtoseveredrought

conditionsintheirearlychildhoodreceivefeweryearsof

formaleducation,aresignificantlylesswealthyasadults,and

havereducedadultheights(HylandandRuss2018,Cooperetal.2019).Undercertainconditions,theseeffectscanbetransmittedtothenextgeneration.

AnanalysisofdatareportedtoEM-DAT,theInternational

DisasterDatabase,1showsthat,betweenJanuary2000

andSeptember2024,406droughteventswerereported

globally—171(42percent)inAfricaalone.Gapsinlossdata,

affectingbothhumanandeconomiclosses,existforall

disastertypes(Jones,Guha-Sapir,andTubeuf2022),buttheyareparticularlyprevalentindroughtevents(Enenkel,Guha-

Sapir,andZaitchik2024).

DroughtsacrossAsiancountriessignificantlyaffect

agriculture,foodsecurity,andeconomicstability.In

Afghanistan,droughtshavesharplyreducedagriculturalproduction,withcropyieldsforpeas,cotton,andwheat

1oVERVIEW

FIGURE1.1

DroughtEventsandEstimatedPopulationAffectedReportedtoEM-DATbetweenJanuary

2000andSeptember2024

Europe

AP:1.3m

TP:750m

TDE:26

AP:58.1m

TP:1,040m

TDE:98

AffectedPopulation(AP)

Asia

Americas

Africa

AP:418m

TP:1,400m

TDE:171

TotalDroughtEvents(TDE):

AP:2.8m

TP:43m

TDE:17

IBRD48496|

NOVEMBER2024

ThismapwasproducedbytheCartographyUnitoftheWorldBankGroup.Theboundaries,colors,denominationsandanyotherinformationshownonthismapdonotimply,onthepartoftheWorldBankGroup,anyjudgmentonthelegalstatusofanyterritory,oranyendorsementoracceptanceofsuch

boundaries.

4,000Millions

250Millions

15Millions

1Million

1–50mm50–100m>100

AP:1,180m

TP:4,700m

TDE:94

TotalPopulation(TP)

Oceania

Source:EM-DAT2024.

Note:Aninteractivemapwithcountry-leveldatadevelopedforthisreportcanbeaccessedat

https://public.flourish.studio/visualisation/20371792/

.Darkbluecirclesrepresentthecontinent’stotalpopulation.Lightbluecirclesrepresentthetotalpopulationaffectedbydroughtpercontinent.

1.oVERVIEW

plummeting(MalettaandFavre2003).Cultivatedareashavedroppedbynearly70percentinsomeregionsbecauseof

prolongeddroughts.InIndia,the200203drought,affectingnearly300millionpeople,wassevereinmagnitude,spatialextent,dispersion,andduration(Chandrasekaraetal.2021).

InLatinAmericaandtheCaribbean,droughtsposea

substantialandmultifacetedchallenge.CentralAmerica,

particularlytheDryCorridor,facesrecurringdroughts,

severelyaffectingaccesstowater,foodsecurity,and

livelihoods.Theregionsheavyrelianceonrainfallfor

agriculturemakesitparticularlyvulnerabletoprolonged

droughts,leadingtocropfailures,incomeloss,andeconomicinstability.Infact,droughtstherecanresultinagricultural

lossesofaboutUS$4billionannually.Theselossesnotonlyaffectruralincomesandjobopportunitiesbutalsohave

broaderimplications,contributingtomigrationandfurther

exacerbatingsocialandeconomicdisparities(WorldBank

2024a).Unlikelarge-scalefloodsthattendtobeinthe

centerofthepubliceye,droughtisoftenslowmoving(flashdroughtsareanexception(yuanetal.2023),highlypolitical,andunlesstherearedirectsocioeconomicconsequences,suchaslarge-scalefaminelessvisiblethanothernatural

hazards.Fundinglargelyconcentratesonimmediate

responseandrecoveryeffortsratherthanriskmitigation

activities.Amongthetencountriesmostaffectedbydrought,thetotalresourcesavailablefordisasterriskmitigation

andpreparedness(includingallnaturalhazards,notonly

drought)wereonlyUS$.07perpersonayear(UNCCDGlobalMechanism2021).

Partlymotivatedbyglobalinitiatives,suchasthe

IntegratedDroughtManagementProgramme(IDMP)andtheGlobalShieldFinancingFacility(WorldBank2022a),amoreproactive,risk-informedapproachtodrought

riskmanagementisemerging.Itemphasizestargeted

investmentstomitigateandprepareforfuturedroughts,ratherthanfocusingsolelyonemergencyresponseand

unpredictablefundingoncetheyhaveturnedintofull-blowncrises.However,despitetheclearbusinesscaseforproactivedroughtriskmanagement,establishingpre-agreedfunding

instrumentsfordroughtremainschallenging,partlybecauseofconcernsaboutpotentialfalsealertsandresultingbasisriskevents.

ImpactsonDifferent

Stakeholders

Asawater-relatedclimaterisk,droughtimpactscascade

throughfood,energy,urban,andenvironmentalsystems.

Growingpopulations,risingincomes,andexpandingcitieswillcreatearapidriseinwaterdemandwhilesupplybecomes

moreerraticanduncertain.Itwilldisproportionatelyaffectthemostvulnerableindividualsmostimportantlywomenand

smallchildrenonallcontinents(WorldBank2016).

Low-incomecountriesareparticularlyvulnerabletothe

effectsofdroughtsduetotheirlimitedfinancialmeanstoinvestinwater-supplyinfrastructureandtheincreasing

burdenonfreshwatersources.Theimpactsareoftenexacerbatedbyanthropologicalactivities,suchas

deforestation,overgrazing,soildegradation,andwatermismanagement(WorldBank2016).

Theactorsaffectedbydroughtand/orresponsiblefor

managingdroughtrisksarediverseandincludethefollowing:

COMMUNITIES:Lowerwaterqualityduringdrought

conditionscanincreasehealthriskstriggeredbyalackof

sanitationchildstunting;humandisplacements;lossofsocial

ties,senseofplace,andculturalidentity;andmigrationto

unsafesettlementsandtheysignificantlyaffecteconomic

activities(WHon.d.).Althoughdroughtisoftennotthedirect

causeofdeath,relatedhealthissues,suchasdiarrhea,are

responsibleforthedeathsofmorethan90percentofchildrenyoungerthanage5inlow-andlower-middle-incomecountries(Almasietal.2022).

ECOSYSTEMS:Droughtalsoaffectstheenvironmentin

manyways.Whenoneoccurs,theexistingpressureson

theecosystemsnaturalwatersuppliesareamplified.Ifthewaterneedsarenotconsideredinallocationdecisions