The document discusses the interplay between climate change, water risks, and critical infrastructure, highlighting how drought and cascading risks disrupt essential services and amplify existing inequalities. It reviews the impacts on various sectors, presents case studies of drought resilience, and explores innovative financing strategies for disaster risk management. Key findings emphasize the necessity for a collaborative approach and resilient planning in addressing the multifaceted challenges posed by climate change and water stress.

1. Roger S. Pulwarty
National Oceanic and
Atmospheric Administration
Climate and water:
Risk and finance
Simple Risk Complicated Risks
Complex, compounding and
cascading risks
Calculated
risk Perceived
risk

2. Climate change reinforces existing inequalities and threatens basic
needs, such as food, water, health, shelter, economic security and
collective peace worldwide.
2021

3. IPCC 2021 Change in drought, heavy precipitation and
soil moisture deficit and confidence in human
contribution (West: increase, medium confidence)
However……………

4. 4
The Making of an Extreme Event: Putting the Pieces Together
(Dole et al 2014 Bulletin American Meteorological Society)
Climatological Climatological + Trend
Climatological + Trend +
Boundary conditions
Climatological + Trend +
Boundary +Initial conditions
2019

5. • Changes in Water Quantity and Quality
• Deteriorating Water Infrastructure at Risk
• Water Management in changing climate(s)
Examples of promising approaches to manage climate-related
water risks exist but the gaps between knowledge and
implementation remains a challenge –especially regarding
systemic, compounding and cascading risks
BLUF-Bottom Line Up Front

6. Cascading Consequences of
Heavy Rainfall for Urban
Systems
• In cities with combined sewer systems, storm
water runoff flows into pipes containing
sewage from homes and industrial
wastewater.
• Increase risk of exposure to waterborne
diseases and toxic chemical plant releases
• Closed roads and disrupted mass transit
prevent residents from going to work or
school and first responders from reaching
those in need. Source: EPA.
Built Environment, Urban Systems, and Cities: cascading risks
(Zhang et al 2018)
Stantec Blue Green corridors project
Blue –Green Infrastructure

7. The changing nature of water sector resilience related to drought
Critical Infrastructure
dependence on water and
potential function degradation
following loss of water services
7
CRITICAL INFRASTRUCTURE SECTOR IMPACTS DUE TO DROUGHT HAZARD
National Protection and Programs Directorate Infrastructure Development and Recovery (IDR) | February 2018
Direct Impacts to Critical Infrastructure from Drought Hazards
SERVICE PROVIDER CRITICAL
INFRASTRUCTURE SECTOR
Raw Water
Availability
Raw Water
Quality
Degradation
Dust Storms Flooding
Land
Subsidence
Exacerbation
Wild Fires
Critical Manufacturing ● ● ● ● ●
Dams
Energy - Electricity ● ● ● ● ●
Energy - Petroleum,
Natural Gas + Coal ● ● ● ●
Food + Agriculture ● ● ● ● ●
Healthcare + Public Health ● ● ●
Transportation Systems ● ● ● ● ●
Water + Wastewater
Systems - Raw Water ● ● ● ● ●
Water + Wastewater
Systems - Treated Water ● ● ● ● ● ●
Water + Wastewater
Systems - Wastewater ● ● ● ● ●
DROUGHT HAZARDS, DIRECT IMPACTS
SERVICE PROVIDER CRITICAL
INFRASTRUCTURE SECTOR
Crit.
Manf.
Dams
Energy –
Elect.
Energy -
Petro, NG,
Coal
Food
+ Ag.
HC +
Public
Health
Trans RW TW WW
Critical Manufacturing ● ● ● ● ● ● ● ● ●
Dams ● - ● ● ● ● ● ● ●
Energy - Electricity ● ● - ● ● ● ● ● ● ●
Energy - Petroleum,
Natural Gas + Coal ● ● ● - ● ● ● ● ● ●
Food + Agriculture ● ● ● - ● ● ● ● ●
Healthcare + Public Health ● ● ● ● ● - ● ● ● ●
Transportation Systems ● ● ● ● ● ● ● ● ●
Water + Wastewater
Systems - Raw Water ● ● ● ● ● ● - ● ●
Water + Wastewater
Systems - Treated Water ● ● ● ● ● -
Water + Wastewater
Systems - Wastewater ● ● ● ● ● ● ● ● -
K
E
Y
F
I
N
D
I
N
G
S
*
Dependency
understood
but
not
identified
specifically
by
reference
Critical Infrastructure Dependencies + Interdependences
SERVICE RECEIVER (DEPENDENT) CRITICAL INFRASTRUCTURE SECTOR
This example is generally based on products provided by the Office of Cyber and Infrastructure Analysis, NPPD, list document.
S
C
O
P
E
Critical Infrastructure Sector Impacts
Due to Drought Hazard
Existing resources from NIDIS, EPA, USDA, DOI, DHS, FEMA,
HHS-CDC, and other sources were compiled to create
a risk analysis of drought hazard impacts to critical
infrastructure sectors. The analysis reflects summaries of
identified vulnerabilities of critical infrastructure sectors
to direct exposure of drought hazards, operational impacts
to each sector that contributes to slow down or stoppage
of essential goods and services to meet demand needs,
and indirect/cumulative impacts of dependent sectors
and communities when supply needs cannot be met.
Ten critical infrastructure sectors and subsectors were
investigated in the context of five drought hazards.
Drought
Hazards
RAW WATER
AVAILABILITY
RAW WATER
DEGRADATION
LAND SUBSIDENCE
EXACERBATION
WILD FIRES FLOODING
Critical
Infrastructure
Sectors +
Subsectors
CRITICAL
MANUFACTURING
HEALTHCARE +
PUBLIC HEALTH
DAMS (AS A DEPENDENT
OF WATER + WASTEWATER)
TRANSPORTATION
SYSTEMS
ENERGY
ELECTRICITY
WATER + WASTEWATER
SYSTEMS - RAW WATER
WATER + WASTEWATER
SYSTEMS - TREATED WATER
WATER + WASTEWATER
SYSTEMS - WASTEWATER
ENERGY SECTOR
PETROLEUM,
NATURAL GAS + COAL
FOOD +
AGRICULTURE
https://www.dhs.gov/
Existing resources from
NIDIS, EPA, USDS, DOI, DHS,
FEMA,, HHS-CDC, and other
sources were complied to
creates a risk analysis of
drought hazard impacts to
ten critical infrastructure
sectors

8. Drought Resiliency Successes
Moulton Nigel, CA
• Aggressive menu of programs
• Conserve 5b litres per year
• Removed 0.5 mil+ m2 of turf
Las Vegas, Nevada
• Pay $300 per square metre
• 50 million litres saved/yr
• 18 m m2 of turf converted
• Set targets for resilience & reasonable
levels of use
• Go big on investing in efficiency and reuse
High Efficiency
Appliances
Turf Replacement/
Xeriscape
Leak Detection
Devices
On-site Non-Potable Reuse

9. UNCCD Global Mechanism
John Ikeda-wth support from Task Group 3 of the
IWG on Drought
May-December 2021
GUIDANCE NOTE ON
DROUGHT FINANCE
DRAFT

10. Number of unprecedented
droughts
(UNDRR Special Report on Drought 2021)
rob (robust): a change
significant in sign and in
magnitude, sign (significant):
a change significant in sign, =
or unc (equal or uncertain).
Drought frequency From the unfamiliar to
the unprecedented

11. © UNDRR – United Nations Office for Disaster Risk Reduction
The Lived Experience: What is being learned ?

12. Water conservation
water flows, harvesting,
storage, water available
for small-scale supplemental
irrigation if needed
Ecosystem health
conserve landcover,
habitats & species
diversity
Good soil quality
incr. soil moisture,
SOM & fertility,
reduce salinity
Healthy water systems
Hydrological regulation
good quality water, water reuse
sustainable treatment systems
Landcover change
Loss of vegetation
cover, habitats
& species
Hydrological deficit
Expand irrigated
area, large dams,
desalination plants
& water transfers
Intense disaster risks
Pollution & intensification
of hydrological cycle, floods
Poor soil quality
Salinization, loss of soil
moisture, SOM &
fertility, Erosion, sealing
Less risk of droughts
& increased biological
productivity
Improved human
well-being, health,
prosperity, innovation,
Fulfilling lives & potential
High risk of droughts
& reduced biological
productivity
Poor expectations
poverty, destitution
abandoned land
out-migration
Land Degradation
& Habitat Loss
Land-based Eco-DRR
& Green Recovery
Human factors
Demographic, Economic
Socio-political, capabilities
Science & Technology
Political & economic
instability
Political stability &
economic prosperity
Policy
&
economic
decisions
perverse
incentives
&
risk
factors
Policy
&
economic
decisions
catalytic
investment,
credit
&
incentives
Climate
NEGATIVE DYNAMICS - INCREASING DROUGHT RISKS POSITIVE DYNAMICS - INCREASING RESILIENCE
(King et al 2021)

13. Finance Case Studies
• Costa Rica : Microfinance for Ecosystem-Based Adaptation
• United States: Revolving Fund for Drought Resilience
• Emerging Innovations (Pay-As-You-Go Irrigation, Blockchain Water Rights
Trading, etc…)
• Australia: Future Drought Fund
• Uruguay: Climate Insurance for Hydropower Stability
• Zimbabwe: Risk Pooling with African Risk Capacity
• Ethiopia: National Productive Safety Net Program
• China: Grain for Green

14. Instruments for drought finance strategies
Primary User Purpose
Instrument Description
National
Govt
Subnationa
l
Govt
Businesses
Households
Mitigation
Preparatio
n
Response
Recovery
Credit
Concessional loan Below-market loans to developing country governments l l l l l
Bonds and commercial
lending
Debt financing from domestic or global capital markets l l l
Green bonds and climate
bonds
Bonds with proceeds earmarked for projects with positive
environmental or climate impact
l l l
Blended finance Combining concessional and commercial finance l l l
Microcredit / SME finance Small-scale loans for businesses and households l l l l
Revolving loan funds Publicly managed funds to support a specific policy goal l l l l l
Agricultural credit Loans for agricultural inputs and equipment l l l l
Agricultural value chain
finance
Loans and other instruments to support the marketing, processing
and export of agricultural products
l l l
Contingent finance
Lending arranged in advance of a natural disaster, with proceeds
released when the disaster occurs
l l l
Savings
Contingency budgets and
reserve funds
Public money set aside for disaster response l l l l
Microsavings
Small-scale savings accounts for poor and vulnerable
households
l l l
Savings groups Informal savings tool l l l
Insurance
Agricultural insurance Insurance to manage risks related to crop and livestock losses l l l
Microinsurance
Small-scale insurance products for poor and vulnerable
households
l l l
Informal risk management Traditional community-based tools for risk management l l l
Business interruption
insurance
Insurance to compensate businesses for lost income if they are
forced to close due to natural disaster
l l l
Sovereign risk insurance Disaster risk insurance for national governments l l l
Risk pools Groups of countries jointly insuring disaster risk l l l
Catastrophe bonds
Insurance-like product to support national governments’
disaster risk management
l l l
Other Instruments
Grants
Non-repayable funding provided for development or relief
purposes
l l l l l l l l
Subsidies and tax
incentives
Grants provided to support a specific policy goal l l l l l
Budget reallocation The ability to shift public budgets in response to natural disasters l l l l
Remittances Money transfers from migrant workers to family members l l l
Payment for ecosystems
services
Paying landowners to use their land in a way that generates
positive externalities
l l l
Environmental markets and
water rights trading
Developing markets for trading credits related to a specific
natural resource or negative externality
l l l
Public-private partnerships
Contractual relationship between government and a firm to
finance and operate infrastructure
l l l

15. 1. Broadening the actor network and their roles in expanding Drought and water-
related finance: vertically and horizontally
National and Sub-
National
Governments
Development
Partners
Universities and
Research
Institutions
Financial
Institutions, Impact
Investors and
Insurance
Companies
Businesses and
Individuals

16. 3. Risk Layering across the nodes
finance addresses both risk layering and risk reduction
Concessional and Commercial Borrowing
Mitigation and preparation investments to reduce
overall incidence and severity of droughts

17. • Long-term and sustained observation programs are
critical, especially for model verification. Without
some degree of verifiability, hard to expect their use
What is the message……..
……..in the context of a changing climate?
Sorooshian, Lall, Pulwarty and others…..
• Despite advances to date, predicting future hydro-climate
variables precisely will remain a major challenge
• Nature is complex and observing and modeling its nonlinear
behavior is very challenging. Esp. reliability of high resolution
information “generated” by models.
tFactoring in resiliency in water resources
system’s design and planning is still the
safest approach

18. © UNDRR – United Nations Office for Disaster Risk Reduction
• Support the establishment of a global mechanism for drought management
and innovative financing focused on systemic risks and opportunities
• Develop national water resilience architecture for partnerships that work to
ensure a seamless link with public, private and civil society partners at local
levels to reduce the stock of risk
Toward adaptive risk governance for water: Vertical and horizontal paths

19. 1
9
Challenge: Sustaining collaborative networks across
research, observations, services and decision-
making
roger.pulwarty@noaa.gov
Thank you !
ODI, WaterAid