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Financial Innovation for Water Cooperation

THE PANEL RECOMMENDS

The international community should create, in a sustained and significant way, financial and other incentives
to promote transboundary water cooperation.

The riparian countries in transboundary watercourses, lakes and aquifers should use conventional sources of
finance for institution building, capacity building and similar activities. The preparations of transboundary
infrastructure projects should ensure high quality and aim at making the projects bankable.

The international community should encourage riparian countries to undertake Joint Investment Plans.

The international financial sector should gradually include transboundary water cooperation in expanded
ESG principles. Ultimately, the ESG framework should include a “Blue Peace” framework and serve as an
incentive for investment in transboundary water projects.
The multilateral development organizations should consider collaborative projects on a preferential basis and
spread awareness about the existing financial facilities. One example is the regional funds of the International
Development Association, which should promote transboundary water infrastructure projects.

New and old sources of finance, including the Asian Infrastructure Investment Bank, the Islamic Development
Bank, and development assistance programs of emerging economies should give priority to collaborative
projects.

New instruments such as the Blue Fund should be created to provide preferential and concessional finance to
subsidize interest, insurance and related ancillary costs of large infrastructure projects for the countries that
are willing to work together in a collaborative way to develop transboundary water projects.

An international task force should be established to assess the evolution of sustainable finance practices and
their application to transboundary water cooperation.

The private sector should be encouraged to develop innovative financial instruments such as blue bonds to
finance transboundary water cooperation.

The problem of preparing bankable projects should also be addressed by providing a neutral, independent
“safe space,” i.e. through pre-negotiation opportunities at an early project development stage with the aim to
address major implementation issues early and proactively. This would help in ensuring the adequate quality
in project preparation.

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