Bridging the Gap: Accelerating Investment in Urban Water Adaptation

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Water crisis in urban area: a data

Over a half of the global population now lives in cities, a figure expected to rise to two-third by 2025. The rapid urbanization brings significant challenges–including poverty, environmental degradation, and most pressingly, a growing water crisis.

More than one billion urban dwellers are predicted to face water shortage in the near future. Due to droughts and irresponsible water consumption, over 80 major cities worldwide have experienced severe water shortages within the last 20 years. The 4.4 billion people who live in towns and cities, particularly in low-income nations, are on the front lines of the 90% of climate disasters that now occur that are related to water. Another data shows that major climate-related disruption, such as flood, droughts, and surface flooding were documented in 85% of cities.

Urban flood in Indonesia: an example of water crisis

Indonesia is no exception to this global crisis, with urban flooding becoming increasingly frequent and severe. From the latest data from BNPB, disaster events in 2025 alone are 852 events, with 67% being a flood disaster. As witnessed on March 2nd, 2025, extreme rainfall in Bogor triggered flooding throughout the Jabodetabek area, affecting over 125,000 people across six cities and causing economic losses estimated at IDR 5 trillion (USD 300 million).

The severity of floods in Jabodetabek Area is not the first event. There was a similar extreme event in the New Year 2020, where heavy rainfall occurred in many parts of the Jabodetabek, such as DKI Jakarta, Bogor, Depok, Tangerang, and Bekasi. The flood was caused by the overflowing of rivers which originate in Bogor, especially in Puncak areas. At least 66 people were reported dead from the accident.

The comprehensive solutions to water problem

These disasters are not anomalies but rather a pattern. To understand how we can respond, we need to look at the problems’ root cause and the solutions available. Flood and water management are deeply interconnected, shaped by both natural and human factors—ranging from topography and rainfall to land use and urban planning. In general, the factors are divided into two groups: natural and human factors.

Given the complexity of the issue, a comprehensive and integrated approach—commonly known as Integrated Flood Solutions—is essential. This approach begins by considering the entire watershed or river basin as a unified system. For example: in the upstream area, we should focus on maintaining land use as a conserving area. In the middle of a river basin, erosion controls and water retain infrastructures should be priorities. For the downstream area, we often talk about good urban drainage, combined with developing a disaster-resilient society.

Solutions on water challenges are no longer only about engineering infrastructure–they are increasingly recognized as essential elements of climate adaptation. Water solutions, especially in urban areas (example: flood control, improved drainage, or rainwater harvesting), are often categorized as adaptation measures because they focus on responding to and managing the impact of climate change, rather than directly reducing emissions.

As cities adapt to climate change, water management has become central to resilience strategies. Most water-related interventions—such as flood control, drainage improvements, and rainwater harvesting—are categorized as adaptation measures because they address the impacts of climate change rather than its causes.

Increasingly, Nature-based Solutions (NbS) are seen as vital tools in water adaptation. NbS leverages natural processes—like infiltration, absorption, and ecosystem restoration—to manage water sustainably. Not only is it favoured for its multi-benefits, but NBSs also offer an alternative to using already implemented infrastructures which is likely to yield more successful results (Alves et al., 2019). Examples include urban wetlands, permeable paving, green roofs, and watershed restoration.

Example of various urban NbS, both for climate adaptation and mitigation

The investment gap in water adaptation

In the context of urban NbS as solutions, they need financing. Urban climate finance has been a growing discussion since 1992 where “financial resources” context was embedded in the UNFCCC document. COP15 in Copenhagen marks a major turning point in climate finance, where developed countries committed to mobilize USD 100 billion per year by 2020 to support mitigation and adaptation efforts in developing countries. Based on the latest data from .., only 1.2% urban climate investments go towards adaptation and resilience. The amount of money being spent on adaptation now, however, is a small portion of what will be required to prevent future effects that are disastrous and expensive.

The need for adaptation measures is growing, particularly in urban planning and water management, but they are not being adequately funded in comparison to mitigation. Data from CPI stated that most of the climate finance was spent on the energy sector (20,000,000 million USD from 2016 – 2019), and very less was spent on adaptation measures. This data is due to the stigma on adaptation measures that it is not commercial but needs large investment. The available finance is dominated by the public sector, since adaptation projects are not interesting for the private sector.

Based on OECD (2020), solutions related to water supply, sanitation and flood protection often lack commercial appeal due to their long-term benefits, site-specific design, and dependence on public financing. Only a small number of countries have started addressing the problem of funding water system adaptation, by integrating adaptation into their current budgetary processes through special projects utilizing global funding sources. A few other countries have set aside money specifically for adaptation to climate change, which usually involves water-related measures.

This broader funding gap is even more visible when we look at specific solutions like Nature-based Solutions.

Why Nature-based Solutions struggle to scale

There are several reasons why adaptation measures–particularly NbS–struggle to scale despite their multiple benefits. Although they are increasingly recognized for their environmental, social, and economic co-benefits, they face several implementation challenges that limit their scalability. Inadequate and inefficient regulatory, governance, and funding structures are major systemic implementation barriers. NbS also suffer from a lack of expertise and real-world experience in developing bankable projects, especially in urban contexts.

However, studies (e.g., Cortinovis et al. 2022) show that when implemented systematically—through a mix of small and medium-scale projects—NbS can provide cumulative, city-wide resilience benefits.

Building an ecosystem for water innovation and adaptation

To solve complex water management challenges, we must shift from fragmented, one-off solutions to an integrated ecosystem where innovation is driven by cross-sector collaboration, local context, and measurable impact.

Urban water challenges are highly context-specific, influenced by local climate, infrastructure, and governance. No single approach or actor can address them in isolation. This complexity calls for adaptive, collaborative, and scalable solutions. In this context, innovation becomes essential.

Nature-based Solutions (NbS) can appeal to the private sector when they open up new revenue opportunities, enhance the resilience of business operations, lower expenses, or strengthen reputation and purpose. The private sector may engage as investors, developers, providers of market infrastructure, clients, or beneficiaries. In recent years, several initiatives driven by private entities have been launched.

Technology adaptation must be locally grounded

Innovation enables scalable and replicable solutions, creating new pathways for investment in climate adaptation. When backed by risk-sharing from the public sector, private actors can co-develop delivery models, pilot scalable solutions, and develop technologies. However, for innovation to be truly effective, it must be rooted in local needs, capacities, and ecological realities. It is crucial to co-design the technologies along with the communities and tailor the solutions based on their socio-environmental context–therefore it is more likely to be adopted and maintained.

Impact measurement as a catalyst for climate adaptation finance

One of the biggest barriers to financing adaptation—especially in water and NbS—is the lack of standardized impact measurement. Unlike mitigation, which can be quantified through emissions reduction, adaptation outcomes are often long-term, site-specific, and harder to measure. This makes it difficult to attract private investment. Due to inadequate impact tracking and a lack of knowledge about returns, private funding presently accounts for just 14% of NbS funding.

Therefore, pilot projects must demonstrate measurable impact—not only in water retention or flood reduction, but also in social and ecological co-benefits. Strong metrics increase investor confidence by offering predictable returns, manageable risks, and clear accountability. In order to validate and increase adaptation investments, metrics that monitor results like decreased susceptibility, increased resilience, or prevented losses are crucial.

Cross-sector collaboration accelerates scaling and mainstreaming

The data from CPI (2021) shows that 72% of non-profit-led projects focus on empowering marginalized communities. In contrast, profit organizations are less active in this domain but play a key role in advancing technology-driven, innovative, and profit-generating solutions. However, sustainable implementation of Nature-based Solutions (NbS) requires a blended approach—one that combines social impact with technological and financial viability.

This is where cross-sector collaboration becomes essential. Each actor brings distinct strengths: nonprofits provide community engagement and equity-focused frameworks, while the private sector drives innovation and financial models. Together they can work through mechanisms like by pursuing new investment products and market exposures, such as blended financing, carbon finance, and green infrastructure.

Through technical assistance, financial and regulatory incentives, early-stage company development support, and fiscal measures that are in line with environmental results, increase the number of commercially viable projects and businesses that incorporate NbS into their business mode.