The climate crisis is one of the most urgent challenges of our generation. For the water sector, the implications are profound: rainfall is increasingly unpredictable, compromising supply; intense storms are overwhelming wastewater networks, resulting in sewage discharges and flooding; hotter summers are increasing demand for water to keep cool, while droughts are leading to shortages.
Dr Jo Jolly, Director, Environment and Innovation, Ofwat
The sector must adapt and respond to the changing climate so that it builds long-term resilience and reliability in the face of changeable and extreme weather. Siloed, asset-by-asset responses – a model that has become entrenched over many decades – are not the answer.
If we are serious about change, we must develop a new relationship with water: one that values and protects it for future generations, and one underpinned by a regulatory approach grounded in stewardship rather than short-term, tactical solutions.
Only by changing both our relationship with water and our cultural approach to regulation can we hope to overcome the many issues faced by the sector today.
The next chapter
The challenges in the English and Welsh water sector are well documented. We are on the cusp of the biggest shake-up of the water sector in England and Wales since privatisation in 1989.
In 2025, the Independent Water Commission concluded that radical change is required in the water sector, shifting to a much more supervisory regulatory approach. Now, a new separate ‘super water regulator’ in England is set to bring together responsibility for the environment, drinking water quality and industry economics. In Wales, a new separate economic regulator for water will help protect nature, support communities, and drive a low-carbon future.
This is a once-in-a-lifetime opportunity to shape the water sector in England and Wales for generations to come – steering away from short-term legacy approaches that simply haven’t worked.
Embracing stewardship
Dr James Jenkins (Head of Environment, Ofwat) is my guiding light on how the regulatory system must change to deliver the change needed: it must be built on the principles of stewardship.
Experience has shown that when the water system fails, it is the environment that suffers most, with the consequences of that failure going on to negatively impact communities, public health, economic resilience and long-term affordability for consumers. Climate change is not only increasing the scale and complexity of these risks but laying bare the risks of solely relying on more traditional asset responses.
We can no longer treat water as an industrial sector that provides a range of services disconnected from the very environment upon which they depend for their existence. Yes, water services are part of a unified system that includes engineered assets, but they also include people and communities, rivers and coastlines, soils, habitats and the natural processes that regulate water and climate. Decisions affecting one part of this system inevitably ripple across the rest, yet too often they remain framed around short-term business plans that under value the role of the environment.
Stewardship provides a different organising principle. It asks regulators and companies to act as long-term custodians of the whole water system, shifting decision-making towards 25 – 50 year outcomes rather than short-term investment periods of five years or less. In practice, this change in approach can serve to support greater use of nature-based solutions that better work with natural processes to manage water in a rapidly changing climate.
The evidence increasingly shows that nature-based solutions can deliver strong economic returns alongside environmental and community benefits. So, by embedding stewardship into regulatory and investment decisions, the sector can better protect consumers, communities and the environment, while unlocking opportunities for growth that endure over the long term.
Nature as an asset
Crucially, this also means recognising the environment as one of the most – if not the most – valuable assets within the water system and reflecting that belief in every decision we make.
Martha Gellhorn once wrote: “People often say, with pride, ‘I’m not interested in politics.’ They might as well say, ‘I’m not interested in my standard of living, my health, my job, my rights, my freedoms, my future.’”
Replace “politics” with “the environment”, and the point still holds.
And yet, environmental arguments increasingly feel like they are falling on deaf ears – even as the threats accelerate. A recent UK Government strategic assessment of global biodiversity loss, ecosystem collapse and national security highlighted how environmental degradation can disrupt food, water, health and supply chains, and trigger wider geopolitical instability. We need to reshape how we talk about nature and the environment so that they are taken as seriously as heavy engineering and infrastructure.
Take “nature-based solutions”. It’s a phrase those of us in the water sector will be very familiar with and understand, but to an audience outside of the industry, including communities, the media or policymakers, does it resonate?
If we want transformative nature-based innovation to be taken seriously, I believe we need to start talking about it differently.
The financial sector has already begun to do this, by framing the environment as an asset. Soils, wetlands, aquifers and rivers are as fundamental to system performance as pipes, pumps or reservoirs. They deliver services and create long-term value.
This raises a provocative question. In the new regulatory landscape, where a Chief Engineer will oversee investment in built assets in England, should the new regulators also appoint a Chief Engineer for natural assets?
Innovate to evolve
Thinking differently is exactly what the Water Innovation Fund champions. Since being established in 2020, it has supported cutting-edge technologies – from fatberg-chomping robots to water-quality monitoring drones – and data breakthroughs, including the world’s first nationwide, open, live map of sewage outflows.
From the outset, nature-based innovation has been integral to the Fund’s mission. One of its earliest projects, Seagrass Seeds of Recovery, brought together eight partners including Affinity Water, Project Seagrass, and the universities of Oxford, Swansea and Essex.
With £250,000 of funding, the project built national capacity for restoring seagrass meadows – enhancing biodiversity, improving water quality and strengthening coastal resilience. It has since established the UK’s first inland seagrass nursery and generated planting techniques now used across the country.
Another programme, Mainstreaming Nature-based Solutions, led by United Utilities alongside 24 partners, received £8 million to test nature-based innovation through real-world case studies. It is delivering a Common Value Framework to assess the benefits of natural assets – a tool that will be openly available to inform future regulatory incentives.
Elsewhere, innovative approaches have embedded nature into business as usual. A partnership between the Greater London Authority and Thames Water is reimagining how street works can deliver sustainable drainage systems – like raingardens.
With £1.3 million of funding, the project incentivises utilities to refill some of London’s 165,000 annual road excavations with rain gardens and other sustainable urban drainage systems. The result: reduced flood risk, cooler and healthier streets, and potential cost savings of up to 26%.
These projects are proof that a different way of working is possible – one that recognises nature as critical infrastructure.
In just five years, the Water Innovation Fund has supported 109 projects involving more than 250 partners, with dozens more on the way. The challenge now is scale.
Human ingenuity is not the limiting factor
We are not short on ideas. For nature-based innovation to become a strategic piece of the climate crisis puzzle, what needs to change is culture and mindset.
With £3.3 billion earmarked for nature-based solutions in the upcoming investment period, the sector must set clear, credible investment narratives for natural asset portfolios. Collaboration and inclusion are essential.
The decisions made now about the new regulatory regime in England and Wales will shape the water system for generations to come. Our biggest risk is doing what we have always done.
Without decisive action, we will enter the next phase of reform without clarity, confidence or credibility.
If we do not articulate how regulatory culture must evolve to think about the long-term sustainability of the whole water system, we run the risk that the short-termism that has undervalued the environment becomes entrenched for another 40 years.
What lies before us is a once-in-a-generation opportunity to shape a water system that continues to deliver world-class drinking water to 61 million people, while also protecting rivers, soils and coastlines; preventing pollution and flooding; reducing emissions; and working with nature rather than against it.
We must prize nature-based innovation as highly as engineering excellence. We must see ourselves as stewards of a whole system, with natural assets at its core. And we must consider not only the next five years, but the next 50.
Our water system deserves it. Our environment depends on it. And ultimately, so do we.
Water Innovation Fund’s competitions
Entries are currently open for two of the Water Innovation Fund’s competitions. Do you want to be part of the water sector’s solution? Read on for more information about the opportunity for change.
The Water Efficiency Lab is a £25 million challenge-led competition seeking to unlock and scale innovations to reduce water usage across England and Wales.
In its first year, the competition will award innovators £5 million in total funding, and up to £1.5 million for individual projects, to develop new technologies, tools and solutions that enable people and businesses to understand their water use and take steps to reduce it.
The competition will remain open until 10 March 2026. Winners will be announced in June 2026, with funding awarded to the most promising projects.
The Water Discovery Challenge is a £7.5 million competition to accelerate the development and adoption of promising new innovations for the water sector, to benefit customers, communities and the environment. It is set to run for up to 20 months.
The challenge invites ideas from innovators across multiple sectors to bring in fresh thinking, breaking down barriers to entering the industry.
Entries remain open until 8 April 2026. Up to 20 entries will progress to a finalists’ stage, receiving a package of funding (up to £100,000) and capacity building support to develop their solutions. Up to 10 winning entries will be awarded further funding (up to £550,000), as well as expert mentoring from water sector partners.
