Sustainability-linked finance is becoming essential for end-users

As water increasingly becomes a strategic risk for industries, Tilly Leeman says the financial landscape for industrial users is also changing rapidly.

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Industrial water users are increasingly confronting the reality that water is no longer an assumed input, but a strategic risk. Rising scarcity, pollution pressures, and climate‑driven volatility threaten production continuity, cost structures, and regulatory compliance. Against this backdrop, sustainability‑linked finance (SLF) should be considered one of the most powerful tools that could enable industries to modernise their water and wastewater systems while tying financial benefits directly to environmental progress.  

For industrial water users, this risk landscape manifests in costly production interruptions, increasingly strict discharge regulations, and pressure from investors who now scrutinise water alongside carbon. 

As risk sharply accelerates, so does the opportunity to engage SLF. CDP corporate reporting on water security has increased 238% between 2020 and 2025. Emerging from this trend is the most comprehensive data backbone financiers have ever had - this enables them to more accurately price water performance into capital decisions. Companies and industries that have a strong history of transparent reporting already hold a distinct advantage in accessing SLF since second party opinion providers will rely on historical water data to rate the strength of the water-related target in question. For those without this track record, access to favourable financing will be harder, slower, and more expensive, lending urgency to transparent reporting even where mandated reporting lies on shaky ground.  

Unlike green loans and bonds, generally restricted to specific eligible projects, SLF enables companies to invest broadly across operations while linking financial performance to agreed‑upon water metrics. If a company improves its water performance, it pays less to borrow. If it fails to meet its sustainability targets, financing becomes more expensive. The structure is flexible, measurable, and aligned with the growing expectation that companies demonstrate real progress on water stewardship rather than relying on broad commitments. Its simple, strategy-agnostic logic should make SLF a compelling option for a variety of industrial water users.  

For many industrial water users, the groundwork needed to support SLF has already been laid. Industrial water users across a spectrum of industries are popularising robust frameworks and standards which impact the KPIs that SLF would typically focus on, making SLF an increasingly low hanging fruit. For example, CEO Water Mandate’s Positive Water Impact guides companies through thorough risk assessments towards multilevel improvements in water quantity and quality metrics, including mitigating water risks at a site and basin level. Additionally, science-based targets for freshwater use hydrology-driven methodologies to improve water quantity and quality in at-risk basins. Now is the time for companies to leverage this complex work to benefit from financial opportunities that reinforce continued improvement.  

There are several avenues for tying SLF terms to KPIs, for example: 

• Increases in recycled/process water percentages;

• Reductions in effluent contaminant loads;

• Improvements in real‑time monitoring and leakage detection. 

In practice, industrial end users and those working with them are already using SLF to translate water ambition into capital access:

• Chilean pulp and paper giant CMPC has been leveraging SLF since 2021 beginning with a sustainability-linked bond framework which links to a 25% water intensity reduction (m3/ton product) as one of just two KPIs. BNP Paribas, Bank of America, Goldman Sachs and JP Morgan acted as Global Coordinators and Joint Bookrunners, Santander and MUFG functioned as Joint Bookrunners. BNP Paribas and JP Morgan also jointly operated as Sustainability Coordinators for the issuance. 

• Select Water Solutions, a major player serving the oil & gas sector, closed a $550 million sustainability‑linked credit facility in 2025, with borrowing terms directly tied to increased produced water recycling and safety. Its target was to double recycled water volumes at its fixed facilities from 185 million barrels in 2024 to 403 million barrels by 2029, illustrating how SLF frameworks can drive significant industrial recycling expansion. The credit facility was led and financed by a syndicate headed by Bank of America, which served as Lead Arranger and Agent. JPMorgan Chase Bank, Bank OZK, and MUFG Bank, Ltd. acted as Joint Lead Arrangers and Joint Bookrunners, with BofA Securities, Inc. and J.P. Morgan Securities LLC serving as Joint Sustainability Structuring Agents, and Cadence Bank partook as an additional lender.

  
  

This alignment between finance and performance has material consequences for how water technologies are deployed. Linking operational improvements and financial rewards creates a pathway to scale proven but capital-intensive technologies such as membrane filtration, advanced oxidation, and anaerobic digestion. It also gives manufacturing industries, particularly those with high-volume water systems like cooling loops, process water lines, and parts washing, clear incentives to deploy advanced treatment solutions, reduce intake volumes, and transition toward closed-loop or near closed-loop systems. 

Importantly for technology providers, industrial water users using SLF will drive innovation by tying access to cheaper capital directly to improved water outcomes, which creates a strong incentive to rethink how water is managed. To meet ambitious, time‑bound KPIs, firms are more likely to invest in novel technologies (e.g. advanced treatment, reuse, digital monitoring), redesign processes to reduce water intensity, and pilot circular or zero‑liquid‑discharge approaches that would otherwise struggle to compete for capital or be curtailed by risk-averse C-suites.  

SLF uptake would also encourage experimentation with outcome‑based contracts and partnerships with water technology providers, since measurable performance becomes critical. Over time, this would shift innovation from incremental efficiency gains toward system‑level changes in production, data, and governance, accelerating the diffusion of new water solutions across industrial sectors.

Sustainability‑linked finance can no longer be treated as a niche instrument for water management. It must become a core strategic tool for industrial water users as water scarcity and quality risks increasingly determine competitiveness and long-term resilience.

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Key players in sustainability-linked finance

In practice, a typical manufacturing company seeking sustainability‑linked finance will work with one or more large commercial banks (for structuring and underwriting) plus institutional investors (for bond placements), and occasionally with development banks or specialised sustainable banks depending on its size and geography.

Financier Type	Key players	Main roles in SLF
Large commercial banks	ING, BNP Paribas, Nordea, Banco Bilbao Viscaya Argentaria, HSBC, DBS, JPMorgan Chase & Co, Natwest, MUFG Bank, Bank OZK, Bank of America	Arrange and structure sustainability‑linked loans and bonds; act as lead arrangers, bookrunners and sustainability coordinators. Many large universal banks now have dedicated sustainable finance or transition‑finance teams.
Development and public finance banks	The Industrial Development Bank of Turkey, BRD - Groupe Société Générale, European Bank for Reconstruction and Development, Development Bank of Japan, Brazilian Development Bank, National Bank for Agriculture and Rural Development.	Provide sustainability‑linked loans, often in emerging markets; blend concessional and commercial capital for industrial projects (currently decarbonisation is the primary focus rather than water).
Asset managers and institutional investors	BlackRock, Amundi. Goldman Sachs, Vanguard, Pacific Investment Management Company, Natixis, Allianz	Buy sustainability‑linked bonds and other labeled debt. Their role is less about arranging facilities and more about providing demand for labeled securities, influencing issuers’ ability to raise sustainability‑linked funding at scale
Specialist sustainable banks and cooperatives	Triodos Bank, ProCredit, Vancity, RBS international, Nordic Invesment Bank	Finance smaller manufacturers and suppliers, especially those adopting cleaner technologies, energy efficiency and circular‑economy models.