AIIB report urges greater investment in protecting the global water cycle
Global water security is emerging as a critical macroeconomic and development challenge, with the Asian Infrastructure Investment Bank (AIIB) calling for the hydrological cycle to be treated as essential infrastructure, as rising pressures of scarcity, excess, pollution and variability increasingly impact economic stability, food systems and financial resilience, supported by evidence of widespread water stress, growing sanitation gaps, climate-linked risks, and an estimated USD 7 trillion global financing gap for water infrastructure by 2030, according to the Asian Infrastructure Finance 2026 report.
Erik Berglof
In a press statement, AIIB says its report positions the water cycle as a foundational system for economic stability and development, urging a shift in how governments and institutions approach water governance.
Erik Berglof, Chief Economist, AIIB, describes the hydrological cycle as the planet’s own life support system, functioning as an environmental pump, global thermostat and natural filter.
Zou Jiayi
Zou Jiayi, President and Chair of the Board of Directors, AIIB, states that water pressures are no longer a distant risk but a present and growing constraint, defining a global crisis of too much, too little, too dirty and too variable water.
The report highlights the scale of global water systems, noting that the atmosphere holds around 13,000 cubic kilometres of water at any given time but circulates more than 500,000 cubic kilometres annually. It finds that nearly half of global land rainfall originates from moisture generated over other land surfaces, underscoring the transboundary nature of water cycles.
It adds that the landlocked regions such as Central Asia receive about 47 pc of rainfall from external moisture sources, compared to the global average of 26 pc, while rainforest nations like Brazil, the Democratic Republic of the Congo and Indonesia generate roughly one quarter of global transboundary moisture flows despite accounting for only 8 pc of land area.
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The report says that the positioning water risk as a macroeconomic issue, the report cites World Health Organisation and United Nations International Children’s Emergency Fund (2025) data showing that 2.1 billion people lacked safely managed drinking water and 3.4 billion lacked sanitation services in 2024.
Around 77 pc of global croplands depend solely on rainfall, nearly 31 pc of the world’s population lives in water-stressed basins, and about one-fifth of global wheat and maize production occurs in high water stress regions.
An econometric analysis included in the report finds that water stress significantly weakens sovereign creditworthiness in developing economies. For lower-middle-income countries, a 10 percentage point increase in water stress could lead to a decline of nearly one notch in sovereign credit ratings, while the impact on advanced economies is limited. The report also estimates that the global financing gap for water infrastructure could reach USD 7 trillion by 2030.
Drawing on a global dataset of 3,577 flood events between 2000 and 2020, the report finds that floods trigger immediate spikes in suspended sediments and longer-term increases in algal biomass, particularly in agricultural catchments, while forests provide strong natural resilience against flood-related pollution.
It also notes that wetlands under the Ramsar Convention have seen significant losses, including nearly 2,000 sqkm of permanent water, 12,000 sqkm of vegetation cover and over 10,000 sqkm of forested area between 1995 and 2018, even as agricultural land within these areas expanded by nearly 20,000 sqkm.
The report further links water systems with energy and climate, noting that improved upstream forest cover can increase the capacity factor of run-of-river hydropower plants by 13 pc. It also warns that glaciers in the Hindu Kush Himalaya region could lose between one-third and two-thirds of their mass this century, posing risks to dry-season water supply for nearly two billion people downstream.
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On trade, the report estimates that about 770 billion cubic metres of water were embedded in global trade in 2021, out of total withdrawals of 3,900 billion cubic metres. Countries such as India, Indonesia, Thailand and Vietnam are among the largest exporters of virtual water, while the United States, Japan, Germany and the United Kingdom are major importers.
The findings suggest that water tariffs influence trade patterns more strongly than natural water availability, indicating that water is often underpriced.
AIIB outlines six key recommendations, including investing in combined natural and engineered water systems, scaling climate adaptation infrastructure, reforming governance to reflect basin-level and transboundary realities, promoting equity in water access, leveraging technology such as early warning systems and mobilising long-term finance through public-private partnerships.
The report emphasises that multilateral development banks, including AIIB, will play a central role in advancing these efforts by supporting project preparation, strengthening governance frameworks and mobilising private capital for sustainable and resilient water infrastructure.