Does talking about global “water bankruptcy” make sense?

The United Nations University Institute for Water, Environment and Health (UNU-INWEH) has just published a report on “Global Water Bankruptcy – living beyond our means in the post-crisis era”.

The importance of water is obvious to global sustainability and the report ably highlights the multiple components of this issue – e.g. water-related conflicts, likelihood of future floods and droughts, agricultural water withdrawals, access to drinking water, land degradation and subsidence and so on. The report also touches on the implications of water for urban and industrial development, although its focus is on rural and agricultural stresses – I’ll return to the industrial development issue later.

The authors of the report explain why they use the “water bankruptcy” rather than “water crisis”. In their words: “the language of crisis – suggesting a temporary emergency followed by a return to normal through mitigation efforts – no longer captures what is happening in many parts of the world.” Instead, we are talking about “systems that have overspent their hydrological budget and eroded the natural capital that once made recovery possible”. Water bankruptcy is therefore not only about the 'insolvency' of the system but also about its 'irreversibility'“. In the report’s view, declaring “water bankruptcy” then becomes a necessary act of self-diagnosis: the real issue is “not how to “get through” a crisis and go back to how things were”. Rather it is “how to manage a permanent post-crisis state”.

This is strong language for a serious subject. And I think that using the concept of natural capital is appropriate and useful in this context: water is a natural resource (i.e. capital) which is essential for the production of many natural goods and services (“ecosystem services”). It must be a major component of any “balance sheet” accounting framework for sustainability and nature.

I agree that using the term “bankruptcy” helps indicate the urgency of the situation and that resources are finite. Using a business or personal finance analogy for the problems of global water also allows some interesting analogies between water supply (“income”) and water use (“expenditure”), drawing distinctions between “checking account” and “savings account” sources of supply – a graphic from the report is below.

Source: UNU-INWEH “Global Water Bankruptcy – living beyond our means in the post-crisis era”, January 2026.

But using the term “bankruptcy” carries risks, too. It could be seen as implying that current mitigation efforts (in terms of reduced water consumption, recycling etc.) are pointless because the system will fail anyway. I don’t think this is true, for most parts of the world: mitigation (and adaptation) will remain essential responses to a difficult situation. I don’t think we can simply write-off regions of the world as “water bankrupt” and therefore unfixable: this would have grave implications for their populations. I also worry about how exactly we are supposed to administer these “bankrupt” areas. In short, I think that it is too early and probably counterproductive to declare global “water bankruptcy”.

In fact, many of the highly pertinent recommendations of the report seem more appropriate for a water situation that is in crisis but has not yet completely failed. I agree with most of them. Yes, we urgently need to “tell the truth about limits and losses”; “to prioritize prevention of further irreversible damage”; “to align claims and capacity with degraded carrying capacity”; “to protect the vulnerable and share unavoidable losses fairly”; and “to build institutions for continuous adaptation, not one-off fixes”. All true.

Source: UNU-INWEH “Global Water Bankruptcy – living beyond our means in the post-crisis era”, January 2026.

What, personally, I also think we should also do is to discuss more openly the implications of water shortages arising from other dependencies – and in particular our thirst for AI, virtual services and the industries that are necessary to maintain them. Taiwan provides an early example of what is already happening here: ultrapure water is needed to clean semiconductor wafers, putting local freshwater sources under visible stress. Less pure water is also needed to cool semiconductor plants – as it will be for the escalating number of data centres around the world. Taiwan’s semiconductor plants have already embraced water preservation and recycling technologies to reduce net use, but much more needs to be done. I suspect that a direct water threat to our AI infrastructure might trigger a more sustained response by policymakers than the multiple human problems already caused by continued agricultural degradation – realpolitik at work.

Going back to the report’s proposed natural capital approach, I agree that this will encourage us to adopt different approaches to monitoring and diagnosis. The report reckons that these should include focusing on stocks and trends, not annual flows; the condition of water-related natural capital (e.g. the health of rivers, wetlands etc.); irreversibility markers (evidence of developments that cannot be reversed at a reasonable costs or within relative time frames); a mismatch between existing and future claims on resources and their capacity to supply and pathway indicators to help with early detection of potential (to use their term) “bankruptcy” i.e. system failure. Again, this makes sense, particularly if we face up to the likely future demands of AI and related industries.

In conclusion, I go back the view I state above: this is a highly serious situation but we are not yet “water bankrupt”. I think that I am a fundamentally optimistic person and I believe in the power of action, assisted by technology and financial capital, to improve the situation we are in. I am a religious person but also see the point of secular folk who argue that despair is, indeed, the one unforgiveable sin. So let’s not despair and simply declare “water bankruptcy” – let’s keep working to avoid it.

This article is also published on LinkedIn. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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