Asia and the Pacific have lifted an extraordinary 2.7 billion people out of extreme water insecurity over the past 12 years, marking one of the region’s most significant development achievements. But this progress is now at risk. The Asian Water Development Outlook (AWDO) 2025, released by the Asian Development Bank (ADB), warns that accelerating environmental decline, intensifying climate disasters, and a massive shortfall in water investment could push billions back into vulnerability.
The new report—ADB’s flagship assessment of water security across 50 economies—finds that while targeted investments, improved governance, and strong political commitment have transformed water access for millions, the region remains dangerously exposed. Four billion people still live in economies with major quality, ecosystem, or disaster-preparedness gaps, even where basic water and sanitation systems are already in place.
AWDO 2025 evaluates water security across a multidimensional framework that has been refined over nearly two decades. It measures progress in five Key Dimensions (KDs):
- KD1: Rural household water security – safe, reliable, and climate-resilient drinking water and sanitation
- KD2: Economic water security – water to sustain agriculture, industry, and energy productivity
- KD3: Urban water security – inclusive, safe, and reliable water and sanitation services in cities
- KD4: Environmental water security – protection and restoration of rivers, wetlands, and groundwater
- KD5: Water-related disaster security – readiness for floods, droughts, storms, and climate extremes
AWDO organizes results into National Water Security Index (NWSI) steps, which are based directly on each country’s Key Dimension scores. Each KD is scored out of 20, then placed into one of five steps: Model, Effective, Capable, Engaged, or Nascent. A country’s water security is only as strong as its weakest link: its final NWSI classification is determined by its lowest-performing KD. This approach encourages governments to focus on improving the areas where support is most needed.
Credit: Asian Development Bank
A $4 trillion warning: massive water financing gap through 2040
At the center of AWDO’s warning is a staggering financing gap. The region will require at least $4 trillion in water, sanitation, and hygiene (WASH) investment between 2025 and 2040—about $250 billion per year—to meet rising demand and protect existing systems. Yet current budgets cover less than 40% of what is needed, leaving an annual shortfall of more than $150 billion.
WASH investment is not keeping pace with changing demographics or climate pressures. Rapid urbanization, aging infrastructure, population growth, and declining aquifers all require sustained capital outlays. But AWDO finds that conventional financing models, which rely heavily on public budgets and concessional loans, are no longer sufficient.
ADB Senior Director for Water and Urban Development Norio Saito describes the region’s dilemma as “a tale of two realities”: historic improvements on one hand, and escalating risks on the other
ADB Senior Director for Water and Urban Development Norio Saito describes the region’s dilemma as “a tale of two realities”: historic improvements on one hand, and escalating risks on the other. “Without water security, there is no development,” he said. “The report shows we need to act urgently—deploy innovative finance, strengthen governance, and restore the ecosystems that underpin long-term water security.”
The financing challenge is not only about scale. AWDO stresses that funds must reach the right communities and the right systems. Poorly governed utilities, leak-prone networks, and systems lacking basic maintenance often absorb scarce financing without delivering better outcomes. In rural areas, infrastructure has expanded faster than service quality, leaving many communities with unreliable or unsafe services despite formal access.
To close the gap, AWDO calls for smarter use of capital through blended finance, climate bonds, improved tariff structures, loss-reduction incentives, and measures that strengthen utilities’ long-term financial health. It highlights successful examples, such as Indonesia’s use of sovereign and municipal green bonds and Phnom Penh’s cross-subsidized social fund for equitable access. But the report also warns that without transparency and inclusive governance, new finance flows could reinforce inequalities rather than reduce them.
Water security gaps across the five key dimensions
While the financing gap looms large, AWDO’s deeper concern is structural: each of the five water security dimensions is being stressed by climate change, environmental decline, or rapid urban and economic transformation.
In rural household water security (KD1), the region has made some of its most remarkable gains. Expansion of piped water systems, government-driven sanitation campaigns, and targeted hygiene programs have lifted hundreds of millions from extreme deprivation. In India alone, rural WASH improvements account for a major share of the region’s overall progress. Yet AWDO finds persistent weaknesses in water quality, service reliability, and climate resilience. Many systems remain vulnerable to drought, flooding, or contamination, and health indicators often lag behind infrastructure coverage.
Economic water security (KD2) is increasingly strained by shifting consumption patterns, declining freshwater availability, and climate-driven volatility. Agriculture—the largest water user—faces growing stress from groundwater depletion, irregular rainfall, and soil degradation. Industrial and energy sectors, meanwhile, require more efficient and resilient water use as economies grow.
Mekong Delta.
Urban water security (KD3) is deteriorating in many rapidly expanding cities. More than half of the global population now lives in urban areas, and Asia’s cities are growing faster than most. AWDO flags aging infrastructure, weak drainage, stormwater mismanagement, and rising flood risk as critical concerns. Cities must not only expand coverage but also improve reliability, reduce leakage, and invest in climate-smart systems such as decentralized treatment, reuse, and nature-based flood solutions.
Environmental water security (KD4) remains one of the region’s weakest links. Rivers, wetlands, aquifers, and forests are being depleted or polluted faster than they can recover. The deterioration of ecosystems threatens the long-term availability and quality of water for all sectors. AWDO calls for national river health monitoring, watershed protection, stronger pollution enforcement, and nature-positive infrastructure.
Finally, water-related disaster security (KD5) is under mounting strain. Between 2013 and 2023, the region experienced 244 major floods, 104 droughts, and 101 severe storms—events that disrupt economies, displace communities, and erode resilience. Exposure to sea-level rise and storm surges is increasing, particularly for coastal and delta populations. Yet only one-third of the region’s economies have submitted National Adaptation Plans, indicating major gaps in preparedness and long-term planning.
Restoring balance: governance, nature, and finance must work together
AWDO 2025 makes clear that infrastructure alone is no longer enough. Water security depends on the strength of institutions, the health of ecosystems, the inclusion of communities, and the ability to anticipate and withstand climate extremes.
Stronger governance—especially at the subnational level—is essential for scaling climate-smart services. Cities and local utilities need better tools, authority, and financing to plan, deliver, and maintain water systems. Rural communities require inclusive governance models that engage women and youth, whose roles in water management are often overlooked but central to sustainable outcomes.
Nature must also be restored to its role as a cornerstone of water resilience. Healthy rivers, wetlands, forests, and aquifers regulate flows, filter pollution, buffer floods, and sustain agriculture. AWDO underscores that no amount of built infrastructure can substitute for failing ecosystems.
Above all, governments and development partners must close the investment gap through innovative, equitable, and performance-driven financing that delivers results where they are most needed.
“Asia’s water story is at a crossroads,” AWDO concludes. “The choices made now—on finance, governance, and ecosystem protection—will determine whether the region secures a resilient water future or slides backward.”
