What is Water Really Worth?

What is Water Really Worth?

A new report unveiling the true value of water and introducing a new framework to accurately price water and drive investment in the sector

Water is fundamental to life. Access to clean water transforms communities, supports individual health and drives economic development. Yet, as the world faces increased water demand driven by climate change, population growth and industrial expansion, this foundational resource is becoming increasingly scarce. Nearly half of the global population faces severe water shortages, and by 2050, 46% of global GDP will  be concentrated in high water-risk regions. Despite its critical importance, water remains one of the most undervalued resources in the world, discouraging the necessary investments to ensure its long-term security.

That’s why we developed a new report with Boston Consulting Group, What is Water Really Worth?, that explores the complexities of properly valuing water and introduces a new framework to more accurately price water, ultimately helping to mitigate climate risks and fully realize its economic, social and environmental benefits.

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The Realities of Mispriced Water

Although water creates value wherever it flows, current pricing models fail to reflect its true worth. This long-held practice has led to a significant funding gap, slowing down innovation and worsening water scarcity worldwide. Key challenges facing accurate water valuation, that we breakdown further in In What is Water Really Worth? , include:

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• Risk and opportunity assessment of investment in water infrastructure. Data suggests that investing $1 trillion in water systems between 2020 and 2030 could unlock $7 trillion in economic benefits. Conversely, failing to make these investments could cause societal costs up to $10 trillion.
• Undervaluation and mispricing are intertwined issues. Many cities facing the highest levels of water stress and usage often have the lowest water prices due to subsidies, political resistance to raising costs, and outdated pricing systems. In many countries, water is priced below cost recovery levels—Italy, for example, recovers just 44% of supply costs.
• Sources of undervaluation include estimation difficulties, missed costs, externalities, and social and political considerations. Indirect costs of water, such as legal and corporate social responsibility expenses, and negative social and environmental externalities such as over-extraction, pollution, and the loss of biodiversity and ecosystem services, are often overlooked. Utilities typically focus on direct costs like supply, treatment, and infrastructure, but these account for only about 22% of the total costs. Furthermore, water is perceived as a free and abundant resource, leading to resistance to price increases, particularly for vulnerable communities. Policymakers must balance the need for affordable access with fair water pricing.

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Introducing a New Framework to Accurately Price Water

To address these challenges, we have developed the Water Value Framework, a comprehensive approach for stakeholders to use that is designed to capture the full value of water for a specific location or type of use. 

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The Framework analyzes direct (i.e. households, municipalities, and recreation), indirect (i.e. biodiversity support and extreme weather events), and options for future use (i.e. unused water in reservoirs) of water resources and the economic, social, and environmental impacts. The Water Value Framework can inform decision-making in the public and private sectors to assess the total and marginal value of water at the regional or business levels.

Through proper valuation of water, we can drive innovation and funding by allowing governments and organizations to focus investments where they are most needed such as in water-scarce regions. Investors can also better evaluate the long-term potential of water-related technologies and accelerate investments in key areas such as digital innovation (i.e. smart meters, sensors, and AI-powered water management systems), infrastructure (i.e. advanced desalination) and emerging solutions (i.e., AI-powered predictive models and satellite-based monitoring for flood mitigation). 

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Charting a Path Forward

The water sector is experiencing rapid innovation, with private investment driving over 2,500 M&A deals worth $150 billion between 2016 and 2021. Proper water pricing is key to attracting long-term investment, but broader efforts, including improved availability, public-private partnerships and supportive policies, are essential. With a deeper understanding of water’s economic, social and environmental value, stakeholders can better mitigate climate risks, drive sustainable infrastructure development and unlock water’s full potential.  

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