Federico Buffone
Industry Energy, IMI Corporate & Investment Banking Division, Intesa Sanpaolo
The Italian water sector currently faces a dual challenge: on one hand, addressing a significant infrastructure gap that has accumulated over time, and on the other, transitioning to more efficient and resilient management models that focus on a more sustainable resource use.
For many years, investment has been insufficient to ensure the renewal of networks and facilities. Today, this need is made even more urgent due to the effects of climate change, rising water stress, and the requirement to comply with increasingly stringent European environmental standards. The priorities are reducing water losses by replacing outdated networks and digitalizing monitoring systems, enhancing wastewater treatment, reusing wastewater, and improving the energy efficiency of the entire water cycle.
To support the modernization of the water sector, utilities require stable funding sources. In this regard, the tariff paid by end users continues to play a central role, ensuring that utilities can fully recover over time the costs necessary to develop and operate infrastructure.
However, an efficient tariff system also requires a clear and stable regulatory framework, which is essential in a sector characterized by large investments with particularly long payback periods. In this context, ARERA, the Regulatory Authority for Energy, Networks and Environment, has played a decisive role by developing the so-called “Metodo Tariffario Idrico” (Water Tariff Method) since 2011, now in its fourth edition. With the introduction of MTI-4, which extended the regulatory horizon from four to six years, the Authority has indeed further strengthened cash flow predictability and operator’s ability to plan long-term investments. Furthermore, it has introduced specific incentive mechanisms for energy efficiency and wastewater reuse, reinforcing the link between infrastructure development and sustainability.
Thanks to the gradual enhancing of regulatory stability, the sector has also become increasingly attractive to the financial system. Indeed, bank financing, support from the European Investment Bank, and, in recent years, substantial resources from the National Recovery and Resilience Plan (NRRP) have complemented tariff revenues over time, significantly accelerating investment.
However, some challenges remain. The expiry of numerous concessions in the coming years could create uncertainty for investors and lenders. Moreover, as the NRRP resources are gradually exhausted, a key question is how to continue financing the sector's infrastructure and energy transition without placing an excessive burden on end users.
It is precisely in this context that sustainable finance instruments can play an increasingly strategic role in supporting the development of the water sector.
Silvia Tardia
ESG Advisory, IMI Corporate & Investment Banking Division, Intesa Sanpaolo
In recent years, sustainable finance has progressively expanded its range of action, evolving from a tool primarily supporting decarbonization into a strategic lever for strengthening environmental and social resilience. In this context, new subcategories have emerged that focus on specific environmental issues. Among them, blue bonds stand out, aimed at financing investments in water efficiency and protection of water – an essential but increasingly vulnerable resource.
What exactly are blue bonds? They are a subset of green and sustainability-linked bonds. Green bonds provide that the proceeds must be used for specific purposes, namely projects related to water purification, water reuse and digitalization of networks. Sustainability-linked bonds require the issuer to increase the coupon if they fail to meet ESG targets related to water, such as reducing network losses.
Structuring these instruments requires predefined processes before and after the bond is issued, as well as the preparation of a dedicated document in the form of a Sustainable Finance Framework, in line with the guidelines of the International Capital Market Association (ICMA) and the International Finance Corporation (IFC).
While these instruments were initially used primarily in international markets, the Italian utilities sector has recently begun to adopt them as well, driven by the growing importance of the issue within the national context. Major players such as Acea, A2A, Hera, and Iren have incorporated blue investment categories into their Sustainable frameworks. Acea and A2A were the very first Italian issuers to place a blue bond on the market.
Globally, we are seeing an acceleration: the blue bond market reached around USD 5 billion in 2025 and is expected to exceed 6 billion in 2026. The driving force behind this growth is the utilities sector, which alone accounted for over USD 3 billion in issuances in 2025.
These figures confirm a crucial turning point: water is no longer a topic confined to environmental philanthropy, but it has become a structural and strategic component of global financial markets.
