We are at an inflection point for nature-based solutions (NbS) for water security in the developing world. Once a niche approach, NbS are increasingly recognized as aa mainstream tool for addressing water and climate risks—a shift already well underway in major economies and now beginning to take hold across the developing world. Multilateral institutions, like development banks and global climate funds, have dramatically scaled their investment in NbS for water security over the past decade. As the political headwinds facing these institutions grow, threatening their funding outlook, will that momentum hold? This blog draws on our 2025 report Doubling Down on Nature: The State of Investment in Nature-based Solutions for Water Security to explore what has driven this growth and what conditions need to be in place for it to continue.
The Expanding and Catalytic Role of Multilateral Institutions in NbS for Water Security
From 2013 to to 2023 across 140 countries, direct investments1 by multilateral institutions in NbS for water security grew tenfold, a remarkable shift that signals these players are moving to systematically incorporate NbS into their water portfolios. Led by institutions like the Green Climate Fund (GCF) and the World Bank, this growth stands out even against a backdrop of rising global momentum, as total investment in NbS for water security doubled over the same period. Among the investments tracked in our 2025 report, both the scale and the number of multilateral NbS projects grew substantially over the decade. In 2023, we found 11 NbS for water security projects in which multilaterals spent more than USD 10 million (M) annually, while there were none of that size tracked in 2013. These investments span a range of intervention types and water challenges, like floodplain and wetland restoration to reduce flood risk, watershed protection, and forest conservation to secure drinking water supply, and riparian buffer restoration to improve water quality.
This growth is particularly significant given who drives the largest share of investment in NbS for water security globally. National governments remain the dominant investors in NbS for water security worldwide, with investment heavily concentrated in the United States, the European Union, and China. Multilaterals, especially development banks, occupy a distinct and strategic role in this landscape: because they work directly with national government clients in the Global South, they are uniquely positioned to expand the geography of NbS investment beyond the countries where it is already concentrated. Their influence extends beyond their own project portfolios to shape how national governments plan, finance, and invest in water infrastructure—and it is through three distinct channels that this influence is most visible:
- Loans: Multilateral institutions have been expanding loan finance for NbS for water security to national governments in the Global South. Direct investment in NbS for water security in Africa grew fivefold over the past decade, rising from USD 57M in 2013 to USD 288M in 2023, and multilateral loans are the primary driver of that growth. In 2023, 10 of the 16 public initiatives spending over USD 1M annually on NbS in Africa were financed by multilateral loans, up from just one such initiative in 2013. A World Resources Institute report tracking World Bank and African Development Bank (AfDB) portfolios found that these two institutions provided USD 6.3 billion (B) and USD 2.3B respectively in loan financing for both green and green-gray projects across Sub-Saharan Africa from 2012 to 2021.
- Blended Finance: Multilateral institutions have also been deploying blended finance instruments that bring in private actors and water users. For example, the GCF-IFC Scaling Resilient Water Infrastructure Facility, approved in 2024, combines GCF concessional loans with over USD 1B in co-financing from the International Finance Corporation (IFC) to mobilize private investment in water security across twelve countries, including through approaches such as rainwater harvesting and water-source protection.
- Credibility: As large-scale finance providers, when major multilateral funds and banks prioritize NbS for water security in their lending portfolios, they draw in a wider set of actors who begin treating NbS as a credible infrastructure option alongside conventional water infrastructure. This effect is increasingly visible as smaller development banks begin to incorporate NbS into their own water investment portfolios.
Driving Demand and Building Capacity for Scale
Building on this momentum to scale NbS investment beyond early adopters in the Global South will require fundamental shifts in infrastructure planning, design, and financing, especially at the national level. An increasing share of national government clients are beginning to incorporate NbS for water security into their infrastructure planning, particularly for flood risk management—a pattern already well established in Europe as tracked in our report, and now emerging in flood-prone countries across the Global South, including Indonesia and Pakistan, where multilateral institutions are playing a key role. Future growth will depend on building the national capacity needed to drive demand for NbS, incorporating these practices into upstream planning supported by robust project design, cost estimation, and policy development.
Yet demand alone is not sufficient. Even governments that are open to NbS need a pipeline of well-designed, investment-ready projects to draw from. As the market broadens beyond early adopters, building that pipeline becomes just as important as building the appetite for it.
Several multilateral institutions have launched NbS-specific capacity-building programs to address this gap. For example, ADB launched a technical assistance program in late 2024 to enhance the outcomes of its Nature Solutions Finance Hub, which extends beyond providing finance to influencing the policy and planning instruments that make NbS projects possible. The program is designed to support developing member countries in building NbS policies and financing frameworks, review national biodiversity action plans for bankability, and deliver training programs for government officials on NbS approaches and innovative finance.
Multilateral Institutions are also publishing technical standards, tools, and guidance that reduce friction for governments trying to integrate NbS into infrastructure programs. GCF’s water project design guidelines, for example, provide practical guidance for developing climate-resilient water projects eligible for GCF funding, including structured recommendations for incorporating NbS in drought and flood risk management. The World Bank, working alongside technical partners including the US Army Corps of Engineers and The Nature Conservancy, has also developed joint knowledge and guidance products to advance NbS. This includes its NbS Opportunity Scan, which has been applied in over 100 cities and has informed an estimated USD 1.8B in development financing for NbS.
Project preparation across the water sector—not just in NbS—often requires several years of effort that ministries and utilities cannot consistently finance on their own. Several national development banks have established dedicated facilities that address this gap. The Development Bank of Southern Africa, for instance, provides support for project identification, feasibility assessment, and financial structuring through grant funding or highly concessional lending, a model that could be extended to NbS as institutional appetite grows.
Mainstreaming Under Pressure
Capacity constraints are not the only challenge on the horizon. Sustained multilateral investment in NbS for water security will depend in part on donor funding cycles for multilateral climate funds and the broader trajectory of multilateral climate finance. Shifts in donor commitments are already materializing. The United States has stepped back from its Green Climate Fund commitments, and uncertainty around the upcoming GCF donor funding cycle raises real questions about the scale of grant financing available in the near term. The picture is not uniform. Current trends point to continued growth in development bank lending for NbS for water security even as grant flows tighten. At the same time, progress is likely to be uneven in countries that have relied on grant-funded entry points, consolidating where mainstreaming through loan instruments is already underway, but slowing elsewhere.
What is not uncertain is the underlying driver of demand for NbS for water security. The frequency and severity of floods, drought events, and water scarcity linked to climate change will continue to generate demand for solutions that can effectively reduce these risks, and NbS for water security is increasingly well positioned to deliver them.
The question that remains to be seen is whether NbS can be sufficiently mainstreamed into water sector planning and infrastructure development to be a viable option on the menu of strategies to address the growing water crisis. The tools, guidance, and financing models needed to support this shift are currently dispersed across institutions, and practitioners report that a more consolidated set of design standards would help streamline from interest to investable proposals. Stronger connective tissue across institutions will help peers build on what others have done, avoid duplication of efforts, and gain critical time to deploy NbS more rapidly and effectively as the water crisis intensifies.
Viewpoints showcases expert analysis and commentary from the Forest Trends team.
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