Managing the environmental and social risks of hydropower: private and public roles

Private sector hydropower projects are driven primarily by returns on equity investment balanced by perceptions of risk. This can lead to concerns that such projects may overlook environmental and social (E&S) issues that are fundamental to sustainability. But the two need not be mutually exclusive. We present the business case for adopting the E&S risk management tools developed by the international public finance sector: that better understanding and management of risks can protect expected financial returns and the developer’s reputation. We suggest that bilateral donors support implementation of these tools through a combination of grants and risk management guarantees. In this way, public funds support public goods and local development goals, while private sector funds generate a return on private capital, together furthering sustainable development and growing the global green economy.