The R2-billion conservation bond targets the restoration of key catchments.
Investor returns are tied to measurable ecosystem recovery.
The initiative brings nature-based infrastructure into water finance.
South Africa is turning to nature-based infrastructure to address growing water security risks, developing a R2 billion conservation bond to restore strategic catchments. The five-year scheme, supported by Land Merchant Bank and the Development Bank of Southern Africa (DBSA), will fund ecological restoration projects aimed at improving water supplies by restoring degraded landscapes.
Performance-based bonds tie investors’ returns to measurable environmental improvements, such as removing invasive plants or restoring watersheds. As South Africa faces a widening water investment gap, this initiative will test whether nature-based finance can strengthen long-term water security.
Nature-based restoration enters financial markets
The planned facilities represent a shift in the water financing model, directing funds towards ecosystem restoration rather than traditional infrastructure such as dams and pipelines. Proceeds will support projects that restore landscapes that play a role in regulating natural freshwater flows.
According to Mukuho Mataba, DBSA’s climate finance specialist, the program will support the conservation of critical watersheds, while improving the long-term health of these ecosystems and strengthening the country’s water resilience.
Funding is expected to prioritize removing invasive alien plant species, restoring wetlands and restoring degraded watersheds. These ecosystems act as natural infrastructure, improving water production, stabilizing soils, and increasing drought resilience across downstream communities and industries.
For investors, this structure creates a path to financing climate resilience while tying returns to measurable environmental performance.
Closing South Africa’s water investment gap
The bond comes as South Africa faces increasing pressure on its water system from a changing climate, rapid urbanization and aging infrastructure. Public funding alone is insufficient to meet the scale of investment needed across the sector.
According to a DBSA study, it is estimated that the country will need approximately R256 billion per year to invest in the water sector until 2050, leaving an annual funding gap of approximately R91 billion.
Projects supported by the bond are expected to focus on South Africa’s strategic watershed areas, landscapes that cover approximately 10% of the country’s land mass but supply approximately half of the country’s surface freshwater resources.
This funding shortfall highlights the growing need to mobilize private capital to protect long-term water security.
Funding the water security ecosystem
Similar sustainable finance initiatives have recently emerged in South Africa’s capital markets. In 2025, the Industrial Development Corporation raised R2 billion in sustainable bonds with the participation of the International Finance Corporation. In 2024, Nedbank issued a R2 billion sustainability bond on the Johannesburg Stock Exchange to support water infrastructure and climate-smart agriculture.
If successfully implemented, conservation bonds could demonstrate how bond markets can finance ecosystem restoration while delivering measurable environmental outcomes. The model aims to mobilize private capital to strengthen long-term water resilience by tying investor returns to improved watershed health.
