London’s water infrastructure is reaching a critical tipping point. Without urgent and sustained investment, we could be facing a drinking water shortage within the next decade. At the same time, Londoners remain increasingly vulnerable to surface water flooding – a problem exacerbated by growing climate risks and more frequent extreme weather events.
A rapidly growing population – from around 9 million today to between 10.5 and 11 million by 2050 – is set to drive up demand for water supply, while the capital’s ageing wastewater systems are already under immense pressure. Thames Water, the capital’s largest utility, has identified over £22 billion of required capital investment between 2025 and 2030 alone to tackle leakage and pollution control, boost flood resilience, and support climate adaptation.
The London Infrastructure Plan 2050 takes an even longer-term view, calling for £46 billion in combined energy and water investment by 2050 to keep pace with demand. The sums are vast – and the stakes are high.
What’s required is a portfolio-based investment strategy – one that can mobilise large-scale private capital by managing interdependencies and risk across sectors with an interest in investment in London’s water infrastructure. A portfolio-based approach supports the Independent Water Commission’s July 2025 call for holistic, systems-based water management – integrating supply, wastewater, environmental protection, and infrastructure investment within a long-term framework.
Our new policy briefing, produced in partnership with Mott MacDonald, Driving Investment in London’s Water Infrastructure: The Need for a Portfolio-based Approach, outlines the many benefits of a portfolio-based strategy.
By treating water infrastructure as part of a wider, interconnected system – rather than as a series of isolated projects – we can unlock efficiencies, attract more diverse investment types, and deliver resilience at scale.
Two recent UK initiatives show the value of thinking in terms of portfolios rather than through a project lens.
In the wake of the 2015 Boxing Day floods, which caused £500 million in damages, Leeds City Council launched the Leeds Flood Alleviation Scheme (LFAS) – combining hard engineering with natural flood management to strengthen climate resilience. The Aire Resilience Company (ARC), a not-for-profit Community Interest Company, was formed through a partnership between Leeds City Council, the Environment Agency, The Rivers Trust, Yorkshire Wildlife Trust, and Yorkshire Water. This blend of structural defences and nature-based solutions shows how joined-up thinking can reduce risk and build long-term resilience.
Between 2020 and 2025, Thames Water’s Smarter Water Catchments, piloted in three river catchment areas, generated £4 of external investment for every £1 invested by the company. By working with local communities and adopting nature-based interventions, it delivered significant ecological improvements. While regulatory constraints limited wider expansion, the programme demonstrated the strong multiplier effect that’s possible when investment is pooled and partnerships are prioritised.
These examples prove that a portfolio-based approach can be a practical pathway to delivering the climate-resilient water infrastructure London needs. But it will require a step change in ambition, collaboration, and risk-identification.
That means:
- Transitioning from siloed interventions to a portfolio-based approach: Identifying the interdependencies between actors with an interest in investment in the water sector and allocating investment risk accordingly to achieve the required scale of investment.
- Enhancing risk understanding and transparency: Improving the understanding of risks related to water management and flood resilience across sectors from a systems perspective and acting on the findings of the Independent Water Commission to create integrated 25-year water and wastewater plans that coordinate cross-sector investments and align with environmental and economic goals.
- Aggregating and blending projects: Developing strategies to aggregate, scale, and blend projects to create appealing risk and return opportunities for investors.
- Diversifying funding sources: Unlocking diversified funding sources by increasing the transparency of risk reporting and clearly communicating potential returns.
- Evolving regulatory frameworks: Adapting regulatory frameworks to support and enable a portfolio approach. Introducing more flexibility to allow for risk to better inform return and to incentivise innovative catchment-based partnerships.
With the right mix of vision, cross-sector partnership, and supportive regulation, London can secure the water infrastructure its communities and businesses depend on – and set a global example for how other world cities can thrive in the face of increasing climate and population pressures.