Water Stewardship: The Hidden Driver of Green Finance in Australia

by Terra Yang and Sandra Hall

As Australia celebrates National Water Week (20–26 October 2025), sustainability professionals are turning their focus to an often-overlooked truth: water is not just a resource, but a critical driver of sustainable growth and financial resilience. Water stewardship is more than an environmental obligation; it is fast becoming a financial imperative. Companies and governments that manage water wisely are discovering a powerful synergy: mitigating water risks not only safeguards ecosystems and communities but also unlocks new opportunities in green finance. In a carbon-constrained world, strong water stewardship can elevate an organisation’s environmental, social, and governance (ESG) profile, positioning it to attract sustainability-linked loans, tap into ESG-focused investment funds, and even access government-backed green bonds for climate adaptation projects.

Addressing water risks is not just about avoiding problems – it’s also about meeting the rising expectations of markets and society. Water stewardship has quickly moved from a niche issue to a mainstream indicator of good corporate governance, and several trends are driving this shift.

Global investors increasingly recognise water as a material ESG factor. Major asset managers and pension funds now evaluate how companies manage water when assessing long-term value and risk. ESG-focused investors favor companies with strong water governance and disclosure practices, seeing them as better prepared for climate change and regulation. Conversely, companies with high water risks (and no management plan) may be deemed riskier investments. Notably, sustainable investment indices and ratings–such as the Dow Jones Sustainability Indices (DJSI) or MSCI ESG Ratings–reward robust water stewardship, which in turn can attract capital from specialised ESG funds.

From household products to fashion and food, consumers are more eco-conscious than ever. A growing segment of customers prefer brands that use water responsibly and support sustainable water initiatives.

Large multinational companies are extending their sustainability requirements to suppliers. If a company supplies to global brands in sectors like food, beverages, or electronics, it may be asked to meet water stewardship standards (e.g. reducing water footprint or treating wastewater). Failing to manage water well could mean losing contracts, while excelling can open up new markets. In short, water stewardship is becoming a license to operate within global supply chains.

Governments around the world, including Australia, are tightening water and climate regulations and linking permits or approvals to sustainable practices. Companies that proactively align with national and international water initiatives (such as the UN Sustainable Development Goals or emerging climate/nature disclosure requirements) are better positioned. In Australia, for example, integrating water stewardship can help businesses align with evolving policies on climate adaptation and environmental protection. Being ahead of policy not only avoids compliance surprises but can qualify companies for incentives or public funding support.

In essence, strong water stewardship meets the moment by satisfying the concerns of investors, customers, business partners, and regulators. It signals that a company is responsibly managing resources and prepared for future challenges – a sign of resilience and foresight that the market increasingly rewards.

Beyond mitigating risks and meeting stakeholder expectations, water stewardship actively creates value for businesses, communities, and the environment. By embedding water responsibility into core strategy, organisations unlock a range of co-benefits that bolster their competitive position and open new avenues for growth. Some of the key value drivers include:

Companies that optimise their water use often reap significant efficiency gains and sustained cost savings. Cutting water waste (through reuse and recycling technologies) and preventing leaks or losses can lower operating costs and even reduce energy usage (since less pumping or treatment is required). These efficiencies improve profit margins while conserving a precious resource. Furthermore, water-efficient processes make operations more resilient to droughts or supply interruptions – a critical advantage as climate variability increases. A facility that can maintain output on half the water input, for instance, is far less vulnerable to water restrictions. In this way, stewardship strengthens a company’s adaptive capacity to water stress and climate change.

Committing to water stewardship can spur innovation in products and business models. Companies are investing in circular water systems, such as technologies for water reuse, rainwater harvesting, and “zero discharge” processes, which not only solve their own water challenges but can be commercialised as solutions for others. Some businesses are developing eco-certified products that meet independent water sustainability standards, thereby appealing to sustainability-conscious consumers and commanding premium pricing. There is also growth in nature-based solutions–services that restore or mimic natural water cycles (such as wetland restoration or green infrastructure for stormwater management). These innovations open up new revenue streams and partnerships, positioning companies at the forefront of the emerging green economy.

Leaders in water stewardship build a compelling brand narrative grounded in responsibility and innovation, earning credibility with customers, communities, and investors. This enhanced reputation is more than symbolic; it drives real differentiation in the marketplace. In 2025, Veolia issued its first hybrid green bond, which raised €500 million (AUD $896 million) with heavy oversubscription, to fund projects aligned with its GreenUp strategy, including those in water, energy, and waste management. The financing of ecology-focused projects enhances its positioning as a leader and differentiator in the water sector. Firms with verifiable and impactful water programs often stand out when issuing green or sustainability bonds, since investors increasingly prioritise projects that deliver measurable environmental benefits.

Water stewardship doesn’t just benefit the business, it delivers value to society and the environment, which can strengthen a company’s standing with governments and communities. By helping to improve local water security and ecosystem health, companies generate goodwill that bolsters their long-term social license to operate. This inclusive approach can lead to partnerships with government agencies or NGOs on joint water projects, and even access to public finance or subsidies for environmental initiatives. For instance, a company restoring a catchment or improving urban water infrastructure might tap into government grants or co-investment programs aimed at climate resilience. In Australia, aligning a project with public objectives (like drought-proofing or reef protection) can make it eligible for funding under various green recovery or regional water security programs, effectively leveraging public capital for mutual benefit. Such public-private collaboration in water not only amplifies impact but also enhances stakeholder relationships, creating a positive feedback loop of stakeholder trust, engagement, and shared benefit.

Together, these co-benefits demonstrate that water stewardship is not a cost center, but a value center. It turns water from a potential weakness into a source of opportunity: driving innovation, cutting costs, opening markets, and attracting investment. Companies embarking on this journey often find that what begins as a risk management exercise, transforms into a strategic advantage that propels them ahead of their peers.

One of the most exciting developments at the intersection of sustainability and corporate finance is the rise of green and sustainable finance instruments. These are financial tools, from specialised loans to bonds and equity funds, designed to reward sustainability performance and channel capital into environmentally positive activities. Water stewardship plays a pivotal role in qualifying for and maximizing the benefits of these green finance opportunities. Here’s how robust water practices connect to key financing instruments:

These loans link a company’s borrowing costs to its achievement of sustainability targets. Increasingly popular in Australia, SLLs often include water-related targets, for example: reducing water consumption per unit of product, improving wastewater quality, or implementing water recycling at facilities. If the borrower meets or exceeds these targets, the interest rate on the loan drops, incentivising improvement. By embedding water stewardship goals into loan covenants, banks ensure that companies stay focused on continuous progress in water management. Recent deals illustrate this trend: a major agribusiness, for instance, converted hundreds of millions of debt into an SLL with performance targets for greenhouse gas emissions and water intensity reduction. Likewise, property groups and universities have secured SLLs that reward cutting water use alongside energy savings. Companies with transparent water metrics, clear improvement plans, and third-party verification of results stand out as prime candidates for such performance-based financing. Thus, a track record of water stewardship can directly translate into lower financing costs and improved credit terms – a tangible financial gain from doing the right thing environmentally.

The growth of Environmental, Social, Governance (ESG)-focused investment funds and impact investors means more capital is chasing companies with genuine sustainability credentials. Water stewardship has emerged as a critical litmus test for these investors. Asset managers integrating ESG factors will delve into a company’s water risk exposure (e.g., operations in water-scarce regions) and how it is managed. Companies that can show robust water stewardship–such as detailed water risk assessments, community engagement on water issues, and progress toward water positivity–often enjoy better ESG ratings and access to a wider pool of investors. For example, a manufacturing firm that significantly cuts its water footprint and helps replenish local water sources is likely to score well on the “E” in ESG, attracting interest from sustainability-themed funds. Moreover, some impact investors specifically target water-related outcomes (clean water access, watershed restoration, etc.). These investors seek out companies delivering measurable water benefits, providing not just capital but often patient, partnership-oriented capital. In short, strong water stewardship broadens the investor audience and can lower the cost of equity by reducing perceived environmental risks.

Green bonds are debt instruments earmarked to finance environmental projects. Historically, proceeds from green bonds have been used for renewable energy or energy efficiency, but water infrastructure and sustainability projects are now a major category. This includes investments in water recycling facilities, flood defenses, desalination powered by renewables, or watershed conservation initiatives. Organisations with credible water projects or targets can raise capital through corporate green bonds, appealing to investors who want to fund climate adaptation and resource efficiency. For example, a water utility might issue a green bond to fund a recycled water plant, or a beverage company could issue one to upgrade to water-efficient equipment. To attract investors, the issuer must demonstrate that funds will deliver environmental benefits and be managed transparently – a practice aligned with standard water stewardship principles. Notably, the Australian Government itself has entered the green bond market: in June 2024, the Treasury (via the Australian Office of Financial Management) issued its first sovereign Green Treasury Bond, raising $7 billion AUD to finance public projects driving the nation’s net-zero transition. These government green bonds support initiatives including climate-resilient water systems and ecosystem restoration, and are structured according to international best practices (the International Capital Market Association’s (ICMA) Green Bond Principles) with rigorous reporting. The success of Australia’s inaugural green bond, which attracted strong domestic and international investor demand, signals that capital is available for projects with clear environmental and water sustainability outcomes. Companies that align their capital projects with these criteria (for instance, by ensuring a new factory includes world-class water recycling or stormwater harvesting systems) will find themselves well-placed to tap into green bond funding, whether via government programs or their own bond issuances.

Underpinning all these financial instruments is the need to define what counts as “green” or “sustainable”. This is where frameworks like the Australian Sustainable Finance Taxonomy come into play. Released in June 2025, Australia’s taxonomy provides a clear classification system for sustainable economic activities, aligned with Paris Agreement goals and tailored to the local context. Developed through a rigorous process led by the Australian Sustainable Finance Institute (ASFI) with Treasury oversight, the taxonomy helps investors and lenders identify projects and companies that are genuinely contributing to climate mitigation, adaptation, and other environmental objectives. Water-related investments feature prominently: whether it’s infrastructure for water efficiency, climate-adaptive water management, or nature-based solutions, the taxonomy recognises these as key to Australia’s green transition. By aligning with the taxonomy criteria, companies can signal to financiers that their water initiatives meet credible, science-based standards. Indeed, leading Australian banks and the Clean Energy Finance Corporation (CEFC) are piloting the taxonomy to guide their investment decisions. The CEFC–Australia’s $30+ billion AUD green investment bank–has been a major force in growing the green finance market, including being a leading investor in corporate and project green bonds. The taxonomy will further empower institutions like CEFC and private investors to channel funds into certified green projects. For companies, this means that best-in-class water stewardship can translate into certification or labels that make green financing easier to obtain. Whether it’s getting a sustainability-linked loan that aligns with taxonomy-approved targets or issuing a bond that qualifies under the Climate Bonds Standard (now being harmonised with Australia’s taxonomy), embracing these frameworks turns water stewardship into a stamp of quality in the eyes of capital markets.

In summary, the relationship between water stewardship and green finance is one of mutual reinforcement: strong water practices make a company more attractive to sustainable finance providers, and accessing green finance in turn provides capital to deepen and scale those water initiatives. This virtuous circle is increasingly evident in Australia’s evolving financial landscape. Banks, investors, and government lenders are actively seeking out companies that manage environmental risks like water well, as part of a broader effort to de-risk the economy from climate change. As National Water Week reminds us of water’s fundamental value, it also highlights a new reality – water stewardship excellence translates into financial advantage. Companies that move early to integrate water with finance strategies will find themselves ahead in the race for the growing pool of green capital.

Australia’s push towards sustainable finance is bolstered by a suite of policies and initiatives that explicitly link environmental stewardship – including water – with financial outcomes. Professionals working at the intersection of water, climate, and finance should be aware of these developments, which provide both opportunities and frameworks for action:

Policy / Institution	Purpose & Focus	How It Supports Water Stewardship & Green Finance
Australian Sustainable Finance Taxonomy (2025)	Establishes a national framework that defines what qualifies as sustainable investment in Australia.	Recognises activities such as water recycling, drought resilience, and ecosystem protection — giving investors confidence and helping projects qualify for green funding.
Clean Energy Finance Corporation (CEFC)	Government-owned green investment bank supporting the net-zero transition.	Invests in water-efficient and low-carbon infrastructure, including climate-resilient irrigation and natural capital projects; offers co-investment and concessional finance.
Sovereign Green Bonds (AOFM)	Raises capital for climate and environmental projects through government-issued bonds.	Funds water infrastructure, flood mitigation, and ecosystem restoration; sets benchmarks for transparent green finance and enables public–private partnerships.
National Climate Risk Assessment & Adaptation Plan	Identifies climate risks and guides national adaptation priorities.	Highlights water security as a key risk; encourages businesses to integrate water stewardship and resilience into their transition strategies to attract ESG investment.

Australia’s policy environment is increasingly conducive to linking water stewardship with finance. The combination of clear definitions (taxonomy), dedicated financing vehicles (CEFC, green bonds), and strategic guidance (risk assessments, transition planning) forms a robust platform. Sustainability professionals should align their initiatives with these tools. Doing so will not only help in securing funds and support, but also ensure their water projects deliver outcomes that matter at a national scale (like drought resilience, emissions reduction, and community well-being). The alignment of corporate actions with public goals creates a powerful narrative of partnership in sustainability, which investors and stakeholders find highly compelling.

Water is life – and in today’s world, it is also livelihood. For sustainability leaders and finance professionals, integrating water stewardship into business strategy is no longer optional; it is a strategic imperative and an opportunity. As we reflect during National Water Week on the essential role of water in our environment and communities, we must also recognize water’s central place in driving the next wave of sustainable finance. Those organisations that understand this connection – that every drop of water saved or purified can ripple out in the form of financial resilience and investment – will be the ones that thrive in the green economy.

The examples and frameworks highlighted here in Australia show a hopeful trajectory. When a company in Queensland invests in state-of-the-art water recycling, it not only secures its operations against drought but might unlock a lower-interest sustainability-linked loan as a reward for its foresight. When an agribusiness in New South Wales works hand-in-hand with farmers and Traditional Owners to restore a catchment, it not only ensures long-term water availability but also meets the criteria for green bond funding to expand its program. And as every sector – from mining to manufacturing to finance – strengthens its water stewardship, the cumulative effect is a nation more resilient to climate change, more attractive to ESG capital, and more prosperous in a sustainable way.

The call to action for professionals at this intersection is clear: make water central to your climate and sustainability initiatives. Audit your water risks, engage your local communities, set bold water targets, and communicate your progress transparently. Champion water issues in corporate boardrooms and finance meetings – ensure that when green investments are discussed, water is part of the equation. By doing so, you not only safeguard your organisation’s future but also contribute to a collective effort that will determine Australia’s ability to adapt and thrive in a changing climate.

Let’s use this National Water Week as a springboard for action. Whether you are a sustainability manager, a CFO, a policy maker, or an investor, ask yourself: How can I elevate water in our sustainability agenda? How can I tie water outcomes to financial value? The answers will guide you towards projects and partnerships that make a real difference. In the grand scheme, when we take care of water, water takes care of us – sustaining communities, ecosystems, and yes, the economy. By embracing water stewardship as a core principle, we invest in a future where both people and capital can flourish in harmony with nature – a future worth striving for, starting now.

Happy National Water Week – may it inspire us all to bring water into focus and finance a better tomorrow.