Groups audience: 

More effective cross-sectoral “nexus” cooperation would improve the sustainable management of natural resources in transboundary basins. Such cooperation would help reconcile the multiple uses of water resources including agriculture, energy, domestic and industrial supply, and environmental needs and benefit land resources, while positively impacting the status of shared waters. Following the formulation of the water-food-energy-ecosystem “nexus” concept, two core objectives quickly emerged: to guarantee coherence inimplementation of the 2030 Agenda for Sustainable Development, and to provide “out-of-the-water-box” solutions to water management challenges in transboundary basins around the world.

This publication takes stock of accumulated experience, especially within water institutions, on the design, implementation and financing of nexus solutions to address common water and environment challenges in transboundary basins.Several water institutions have led or participated in cross-sectoral nexus dialogues, while others have designed and implemented plans and projects aimed at reconciling multiple uses of resources, reducing negative trade-offs and increasing synergies across sectors. Some of these multi-stakeholder dialogues were carried out within the framework of the Convention on the Protection and Use of Transboundary Watercourses and International Lakes (Water Convention), under the guidance of a dedicated Task Force on the Water-Food-Energy-Ecosystems Nexus.

The findings presented in this publication emerge from a stocktaking of nexus solutions from around the world, which all involve cross-sectoral cooperation and have transboundary relevance.The accumulated experience is drawn from basin-level case studies and regional dialogues of transboundary relevance in Africa, Asia, the Americas and Europe. The solutions considered in this study, while not always explicitly labelled “nexus”, range from international and transboundary cooperation, to governance, economic and policy instruments, infrastructure and innovation.Moreover, all are implemented on the basis of cooperation among the broad water, agriculture and land, energy and ecosystem sectors, sometimes involving other sectors such as industry, tourism and navigation.

This publication provides a valuable knowledge base for designing and operationalizing nexus solutions and investments, and includes consideration of factors that contributed to their successful implementation and the challenges encountered.The insights from the stocktaking exercise aim to help governmental authorities and other actors better understand the potential of the nexus approach and to take the next steps. They can be particularly useful where intersectoral solutions have been identified but their operationalization is proving to be a challenge. Implementation of these solutions has the potential to address transboundary basin challenges, especially where water authorities engage effectively with economic sectors.

The experiences presented in this publication are the result of a stocktaking exerciseconsisting of a survey and a literature review complemented by inputs from expert consultations and a review of regional nexus dialogues. The ad-hoc survey was carried out in 2020 and involved stakeholders from different countries and river basins. Of the 36 case studies considered, 21 were drawn from the survey and 15 came from the literature review. The case studies were analysed to draw preliminary conclusions on common features and trends related to problems and solutions, financingsources and schemes, obstacles to implementation and enabling factors, as well as perceived added value and benefits.

Nexus solutions tackle a variety of issues related to water quantity, water quality and environment. The case studies drawn from the survey and literature review which mostly reflect the experience of water institutions indicate a higher incidence of solutions applied to address issues related to water quality and environment rather than water quantity (i.e.availability and variability). However, further consultations with experts and the experiences gathered from regional dialogues indicate that nexus solutions are also being developed to solve water quantity-related problems. In particular, the application of a nexus approach is sometimes supported by regional organizations (notably river basin organizations) and international financing institutions with the aim of improving coherence in multi-sectoral water investment planning.

According to the survey, the highest-ranking root cause of these issues is “anthropogenic changes in hydrology”. Other root causes reported consistently in the survey are climate change, data and information limits, poor land use and management, land use change, poor intersectoral coordination, poor water resource management, inadequate finance and inadequate institutional capacity. Determining the root causes of problems in transboundary basins is a prerequisite to applying any solution. The creation of nexus dialogues can also take policymakers a step further by helping them to act upon these problems. This may involve adjusting policies and revising regulation, both of which require time and effort but are ultimately necessary to ensure coherence towards sustainable development.

Stronger transboundary cooperation ranks highest among enabling factors for the implementation of nexus solutions. Other factors include data and information sharing; increased awareness of options and benefits for cross-sector, transboundary trade-offs, compromise and synergies; and innovative operating rules for infrastructure among many others. Challenges that arise during implementation include: political obstacles, data and information shortcomings, inadequate institutions, financial constraints, persistent policy/sector silos, limited technical capacity, and limited time frames and options for benefit sharing.

Transboundary and regional nexus dialogues focus increasingly on the development of joint action. In general, these dialogues are informed by technical studies that address cross-sectoral impacts and the implications of development and climate change. However, despite differences, these dialogues ultimately aim at the operationalization of nexus solutions and investments. Examples also exist of international financial institutions assisting countries with the analysis of nexus dynamics in order to prioritize or review projects, taking into account their cross-sectoral and transboundary impact, and proposing sustainable financing schemes that involve nexus sectors.

By increasing the efficiency of natural resource use,nexus solutions can provide both economic and non-economic benefits (e.g.peace and stability). However, lack of specificity or evaluation of these benefits may prevent the development of concrete cross-sectoral projects. In fact, the respondents to the survey perceive the added value of a nexus approach as relating to the effectiveness of institutions in managing basin issues, rather than to the delivery of these benefits. However, these benefits should be spelled out. In transboundary basins, where investments are generally associated with high risk, the elaboration of transboundary and cross-sectoral arrangements based on shared benefits may increase the prospects of funding opportunities.

Nevertheless, there are clear ways to promote the uptake and upscaling of nexus solutions and investments in transboundary basins, notably basin-level action plans, coordinated strategies and investment plans, and even specific projects. In general, as the study shows, cross-cutting regional strategies agreed by multiple governments, river basin plans developed jointly by the riparian states and regionally coordinated support from financial institutions can be important vehicles for the joint prioritization and implementation of coordinated nexus solutions and investments.

In principle, the nexus approach could help catalyse co-financing for water and environment services from other sectors and private actors; however, there is a lack of evidence that this is happening. At present, the majority of financial resources used to implement nexus solutions come from the state (including donor financing), despite recognition that the nexus approach opens up clear opportunities for more private and blended finance though “green” investments in agriculture, energy, tourism and so on.The study also provides examples which show clearly that financing institutions are also concerned with the coherence of multiple projects in transboundary basins.

Nexus solutions and investments developed locallyor at national level and therefore not reflected significantly in this stocktaking exercise do not necessarily provide transboundary benefits. For this to occur, solutions need to build on common understanding and mutual trust. The mobilization of newfinancial resources can provide an important stimulus for cooperation, directly overcoming financial constraints and indirectly improving the technical capacity of institutions to plan “bankable” solutions involving different sectors. However, no nexus solution can be identified or implemented without greater coherence of policy action and plans, which encompass political dialogue, adequate institutional/governance frameworks and structures, better information, and the search for common objectives, synergies and possibilities for benefit sharing.

Opportunities for nexus investments with transboundary benefits may arise from coordination and partnering across sectors and borders, with the support of regional organizations and through alignment with regionalstrategies for development. As political will is crucial to benefit from these opportunities, it is essential to convince high-level policymakers as well as non-line ministries (e.g.finance and economy) of their merits. The COVID-19 pandemic and recoveryprocess have already prompted some review of programming frameworks, and the space for transboundary and multisectoral actions and investments could be further enlarged, with a view to exploring innovative financing approaches.

Cooperation is particularlyimportant to reduce the risks around investments of regional importance and in transboundary contexts. Ultimately, the political will to coordinate and cooperate to achieve long-term sustainability (economic, environmental and social), including in relation to concrete multi-project schemes, will reassure investors, especially private ones who need structured financing schemes and can help closing financial gaps. The delivery pathway is also important. Based on the study, for example, there seems to be a correlation between infrastructural investments and adaptable programmatic financing, where funds are allocated to a programme (e.g.modernization of irrigations systems in a river basin) without connection to a specific project.

Where they exist, river basin organizations play a key role in facilitating or even catalysing nexus solutions and investments. By coordinating with other regional organizations, such as economic commissions, organizations for energy integration and so on, RBOs can facilitate the cross-sectoral dialogue needed to develop water infrastructure (grey and green), or other measures including information sharing in shared basins. Their contribution can be vital to the development of master plans that are “nexus proofed”. However, much depends on their institutional structure and mandate, the availability of resources and capacity, as well as the willingness of countries to use these platforms to discuss strategic policies and investment plans.

Water management and environment policymakers can use nexus solutions and investments to act upon cross-cutting issues in cooperation with other sectors. Nexus solutions can help tackle environmental issues such as pollution, climate change and biodiversity loss in a more effective manner that involves all concerned stakeholders. Moreover, the nexus approach opens up an opportunity to leverage finance for investments in water and the environment, although there is a need for greater clarity about synergies, overlaps and trade-offs with other sectors’ needs and interests, and to identify common ground for scoping proposals. Crucially, climate action documents (e.g.NDCs, NAPs) should include transboundary components and be linked to strategic basin-level documents (e.g.SAPs), which requires closer cooperation between water and climate action programming.

Energy and agriculture are the main water users and need to adopt a more proactive role in proposing solutions and investments that integrate water and environmental considerations. Efforts to ensure effective management of risks which may relate to competing water and land use needs from other sectors will benefit from early stage consultation and coordination with water and environmental authorities. This approach helps to avoid delays and controversy at later stages in the process. Innovative energy and agriculture/forestry solutions have great potential to generate cross-sectoral benefits, and even when immediate co-financing opportunities do not arise, efficiency and sustainability solutions in project design can translate into economic benefits over the long term. Conversely, uncoordinated actions to address specific problems may fail to resolve the issues at stake at larger scale. For this reason, it is crucial to evaluate sectoral policies and investment plans against their contribution to national and regional objectives, in order to increase resource security and sustainability; and consider development alternatives, trade-offs and transboundary issues early on in the process.

Beyond water, energy and agriculture, nexus solutions and investments should be promoted by finance, economy and other non-line ministries. Water and the environment may rank low among the priorities of countries compared to energy and agriculture, despite the fact that water as a resource and provider of healthy ecosystems is fundamental to all economic activities and social wellbeing. The nexus approach can be helpful to design integrated packages of investments that optimize the available financial resources in order to achieve multiple sustainable development objectives at the same time, and by virtue of their broader scope become eligible for more funding sources.According to this study, programmatic funding seems an efficient way to mobilize public funding and private financing for infrastructural investments (especially if basket funding modalities are possible), circumventing the hazards cited by both the public and private sectors with respect to financing water sector infrastructure.

Innovative financing solutions involving private funding have a major role to play in upscaling nexus solutions in transboundary basins, but they need to be backed by high-level political commitment. Today, public funding (including from donors) is the main source of nexus investments of transboundary value. However, the nexus approach also opens up financing opportunities from the private sector, with prospects for designing innovative schemes that leverage these private investments. Furthermore, cross-sectoral cooperation can be crucial to access climate and environmental funds. At present, this potential is only minimally utilized in transboundary basins where more stakeholders need to be involved. However, the political commitment to coordinate investments could reduce theperceived risk of investors and unlock new resources. Such engagements by co-riparian states can reinforce transboundary cooperation, allowing progressively more ambitious joint projects to be negotiated and undertaken. Transboundary cooperation agreements and basin organizations could also be used to facilitate the implementation of innovative financing solutions.

Nexus solutions and investments can promote transboundary water cooperation and conflict prevention. Understanding the interlinkages between water, energy, land/food and environmental resources can create crucial opportunities to generate cooperation benefits or reduce tension. Insights about nexus issues and solutions can help devise actions that reduce pressure on shared water resources, both surface and groundwater, by acting on economic sectors that use water or have an impact on water resources. Hence,a nexus approach can help uncover unconventional solutions and alternative courses of action for water management and resolve allocation disputes. At the basin level, trade relations influence how resources are used, how their potential is exploited and how the related benefits are shared. Going further, nexus solutions may play a significant role in building trust and conflict prevention, provided that international water law principles are respected.

Document Category: