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ľ¹ÏÓ°Ôº Group¡¯s Country Climate and Development Reports (CCDRs) are designed to help countries align their development and climate goals by identifying actions that can enhance resilience, reduce greenhouse gas emissions, and promote sustainable development. Water plays a critical role across many economic sectors¡ªagriculture, energy, transport, forests, and fisheries¡ªand is a key pathway through which climate change impacts are felt. Understanding how the water sector is integrated into CCDRs is essential for identifying emerging strategies that address both climate risks and development priorities.

This report examines how water-related climate risks and actions are captured in CCDRs published between 2022 and 2024. By analyzing over 3,900 pages of text using advanced text-mining techniques, the study uncovers the central role of water in climate and development strategies. Data visualizations reveal that water challenges are among the most frequently highlighted issues in CCDRs, with many countries recognizing water as a critical element for economic development, human well-being, and environmental sustainability. With thirty-nine countries conducting in-depth analyses of the water-climate-development nexus, the report underscores the importance of water-sector reforms in driving adaptation and mitigation efforts worldwide.

Key messages:

Most critical climate change impact channels discussed in the Country Climate and Development Reports (CCDRs) are directly or indirectly related to water, including water shocks affecting agricultural and energy production, water-related diseases impacting health and labor productivity, and water-related natural disasters and resulting infrastructure damages. While estimates of the impact differ across countries, the poor and vulnerable are often disproportionately affected.

Water sector actions can contribute to both climate mitigation and adaptation. Approximately 10 percent of global greenhouse gas emissions are linked to water-related activities. The water sector offers significant untapped potential for climate mitigation and plays a crucial role in providing innovative solutions necessary for the transition to green energy. Investments in water adaptation deliver substantial social and economic benefits.

The investment requirements in the water sector are substantial, and the financing gap is equally significant. The private sector needs to play a crucial role in bridging this investment gap. To encourage private participation, it is essential to establish clear and transparent governance and policies, implement blended financing mechanisms, and adopt pricing incentives that reward sustainable water investment and management.

Demand-side management often proves to be more cost-effective in addressing water supply shortages than investing in supply-side solutions. Effective water demand management involves adjusting water tariffs to reflect the true value of water in water allocation and use, increasing consumer awareness, and strengthening regulations and technologies to improve water use efficiency. Increasing efficiency requires countries to overcome political-economy barriers while repurposing wasteful water subsidies. Countries experiencing water stress are more likely to advocate for water tariff reforms in their CCDRs.

Future CCDRs can be further improved by (1) systematically estimating the investment needs of the water sector and evaluating their cost-effectiveness; (2) improving modeling approaches to better assess the impact of water sector shocks on the macroeconomy , (3) developing a stronger narrative regarding the effects of water shocks on employment and the importance of transboundary water management, and (4) emphasizing the importance of monitoring the outcomes of water sector investments through systematic data collection, including the use of remote sensing technologies.