Water Alternatives (Jun 2024)
Water, finance and financialization: A review
Abstract
This article reviews the literature on the financialisation of water. Water financialisation is generally defined as a global trend wherein financial actors, instruments and practices increasingly penetrate the water sector. Literature conveying a Marxist interpretation of the phenomenon of water financialisation emphasises the way in which financial profits in the water sector derive from the capturing of rents. We identify three sectors that correspond to different pathways of financialisation in the water sector: large water infrastructure, water utilities/water supply and sanitation (WSS) and water resources as such. The literature points out that water financialisation is leading to increasing socio-spatial fragmentation as water flows towards spaces where water can reap the highest benefits for financial investors. We conclude that there is evidence that financialisation is occurring in different water sectors and in different world regions, with the main driver being the general financialisation of the global economy and sectors relevant for the water sector such as energy and agriculture. There is little or no evidence, however, that private finance in the water sector has increased substantially since the 1990s, despite the promotion of blended finance policies by multilateral agencies and development actors. The literature points out that water financialisation often does not happen through the direct ownership of water-related businesses by finance capital, but rather through complex financial instruments such as water- or environment-focused investment funds that link water to financial gains. There is as yet little knowledge of how these processes function and what their impacts are on socio-spatial development and environmental sustainability.
