Efficient tracking of water and sanitation sector financial data.
Published on: 01/02/2024
Last year, I noticed that more and more clients - some working globally and some at country level - were asking me to track water and sanitation sector financial data. That can be extremely time consuming to get. Mostly the task involves writing many emails and reminders to colleagues that have access to parts of the data and counting on their good will, their trust in my work and the availability of their teams to check their own datasets. Not ideal.
But fear not, this is not a rant blog post. It is a wish list for 2024.
I hope my suggestions might be some inspiration and encouragement to our colleagues that design and implement global and country monitoring systems, to teams of researchers using that data and partners that fund them. My eight suggestions below are not organised in any order.
1. Finance for the sanitation sub-sector needs to be more disaggregated to be useful
The institutions responsible for delivering water services are many, but not as many as in sanitation. Finance allocations to the different aspects of sanitation delivery: capture/containment, emptying/transport, treatment and disposal/reuse, are rarely disaggregated. Why does it matter? Because both the suppliers, the instruments, and the recipients of finance for the different elements of the sanitation chain are very different and at the moment it is rather hard to identify where the largest gaps are in terms of volumes of finance or the reach of finance. Most of the finance seems to be under the responsibility of municipalities, private suppliers and households which is very difficult (read costly) to capture.
2. Climate tags need to be added to sector budgets and expenditure
Finance institutions have been improving their typology on what is considered water and sanitation climate finance. A lot of relevant work has been done on these typologies and they keep improving. We are moving away from purely considering climate investments in water, the funding of infrastructure. For instance, the largest Multilateral Development Banks now also consider climate finance investments that support national and subnational programmes of policy reforms and institutional actions that promote poverty reduction and sustainability. Operational expenditure can be considered to contribute to adaptation if it leads to adaptation activities.
It would be very useful if sector finance tracking exercises would add standardised climate tags. Not only would this build the capacity of the sector in identifying climate finance, but it would make it possible to identify how much finance to the sector is or is not aligned with a country’s climate targets and the National Action Plans.
3. Systems strengthening indicators should reflect outcomes
Many system strengthening indicators for the sector focus on outputs. For instance, if there are costed finance strategies for the sector and if they are being used. But what does it matter if there are costed finance strategies and still, year after year, budgets for the sector decrease? A better proxy indicator of systems strength might be the expenditure rate against progress towards country targets or urban expenditure rate against reduction of non-revenue water. The best indicators are those of outcomes that reflect progress towards the targets but also improvements in sector efficiency.
4. More private sector investments could be captured
Capturing private sector investments under different service delivery models is very patchy at the moment. There are datasets for capturing bonds, private components in blended finance mechanisms and co-financing mechanisms for water related investments within climate funds. However, subsidies to private operators, investments in innovation or the large investments being made by companies to decrease water related risks that can affect their businesses are almost impossible to capture right now.
5. Remember there are more financial instruments beyond grants and loans
There are many more instruments being used in the sector than grants and loans. Bonds, debt swaps, insurance schemes, export credits, carbon credits, etc, are all being used to finance water (climate) sector investments. Some can be found in specific datasets on request only.
6. Update cost estimates for SDG 6
To understand financial gaps we need to know how much we have and how much we need. The last reference we have on the costs of achieving Sustainable Development Goal 6 (targets 1 and 2) is almost 10 years old, the famous Hutton and Varughese report from 2016. UNICEF has updated the costs for target 6.2 in 2020. And that’s it, there are no more recent global cost estimates. I heard a couple of times last year in sector meetings that an agency is updating the “costs to achieve SDG 6” but follow-up has led nowhere yet. Is anyone working on these?
7. Using artificial intelligence instead of tags for search engines
Humans might be struggling to track down finance, but we have potential help from artificial intelligence (AI). An example: to track what climate finance goes into the water sector, many of the climate databases have a tag that mentions “water” or “wastewater” (interestingly there are usually no tags for sanitation). If I search for projects like this, I will typically miss more than half of the projects that include a water component or are related to SDG 6. The alternative is to use other key words and then check projects one by one (the number of projects listed on the climate funds websites is now more than 4.000).
The best results for tracking sector finance come from using AI which takes into account the contextual text environment. The Agence Française de Développement (AFD) has developed the SDG prospector where the algorithm can help you find out, “whether an institution funds more or fewer water projects in drought-affected regions, check whether it supports as many climate programs as it claims, and when and where they were carried out. It's a way of ensuring that strategic objectives are translated into tangible results on the ground.” Once the institutions are identified as contributing to SDG 6 then the financial information still has to be extracted manually, but it is a start.
8. Let's avoid transferring financial data from PDFs to Excel
Finally, a request to all agencies that publish the results of their financial datasets in PDF format. The Excel data import button does not work most of the times. It is really not that much fun to transfer data manually from protected PDF files to Excel. The meditation required to do this calmly is of epic proportions. Making data more easily available will encourage its use, and ultimately, the performance of our sector.
I’m looking forward to 2024 and to learn what your wish list is. I’ll report back at the end of the year!
At IRC we have strong opinions and we value honest and frank discussion, so you won't be surprised to hear that not all the opinions on this site represent our official policy.
