30 November 2025
As climate change bites, the city of Dundee is facing significant deterioration in the quality and quantity of its water supply. The city’s water is derived from Glen Isla, nestled in the nearby Cairngorms. Scottish Water is restoring upland peatland and woodlands here to increase resilience to longer dryer periods and more intense rainfall, thereby ensuring the city’s water supply.
Similar catchment and nature-based initiatives are being progressed across the UK by water utilities to reduce flood risk to critical infrastructure, such as water treatment plants and pumping stations, as well as to increase the drought resilience of water supplies. The focus is on working with natural processes in rural landscapes to capture, filter and store rainfall close to where it falls, and scaling these over a large area.
Here we look at case studies brought to CIWEM’s climate panel from Scotland, Wales and England, and explore some of the barriers and opportunities, reflecting on Ofwat’s 2024 Price Review.
Scottish Water is piloting various approaches to catchment-scale adaptation in response to projected deterioration in water quality and quantity due to climate change. This includes Glen Isla, but also the Loch Katrine catchment north of Glasgow and the Dee in southwest Scotland.
Scottish Water operates in several different land ownership scenarios – from where it fully owns land draining to a water source, to part or full ownership by third parties. Each has different governance, funding and technical challenges and therefore requires a different approach to building long-term catchment resilience.
In the fully owned Loch Katrine catchment, Scottish Water is working with its tenant, Forestry and Land Scotland, on a 10-year land management plan for the 9,500-hectare estate. The plan is focused on landscape restoration – including peatland – and the creation of over 4,000 hectares of native woodland. Risk assessments suggest this approach will extend water quality resilience to 2050 and beyond in a changing climate, as well as improving biodiversity and sequestering carbon.
In the Dee, none of the land is owned by Scottish Water, so here it is working with landowners and other stakeholders to envisage measures needed at scale for a "resilient Dee" by 2080. They are considering the kind of governance structure needed to ensure integration – including partnership working – across stakeholders, integrate funding and prioritise actions. Scottish Water is looking to define where it could invest for customer benefit alongside other funding sources.
In Wales, regulation focuses on improving ecosystem resilience, including sustainable flood risk management. The Wye and Usk Foundation are exploring catchment solutions to address rapid rainfall runoff from rural land with Welsh Water (DCWW) and local farmers. When water cannot percolate naturally into soils and bedrock in the area, rainfall can run very rapidly over land into local rivers and streams. Nutrients and soil particles are picked up by the runoff adding to the already elevated levels of phosphorus in the River Usk, impacting water quality, damaging the river’s ecology and increasing the risk of flooding in downstream communities.
Recent evidence suggests that reducing sheep grazing density in upland areas can have a significant impact on the ability of soils to slow down runoff by allowing more to infiltrate into the local groundwater before slowing percolating into the headwaters of the river. Restoring a better balance between overland flows to the river and flows percolating through local soils and aquifers should lead to reduced flood peaks, lower summer water temperatures in critical fish spawning areas, and support river flows in drier periods.
Welsh Water are setting up a ‘flow trading’ approach, similar to the nutrient trading that has been established by other water companies (for example, Wessex Water around Poole Harbour). Farmers agree to undertake measures to reduce the number of sheep on their land at critical times of year for a certain fee to cover their costs and loss of income. This flow trading, rather than nutrient trading, may be easier for water companies, farmers, regulators and governments to adopt as a way to improve catchment resilience.
One of the key challenges with this approach is the complexity of ownership and maintenance responsibilities for distributed nature-based solutions. To ensure long-term success, trading agreements need to set out clear roles and responsibilities across different stakeholders concerned with improving the catchment – this will be an important output of the work in the Usk.
In the upper River Beult catchment in Kent, Southern Water is working in partnership with the South East Rivers Trust (Sert) and landowners to pilot nature-based solutions to increase the resilience of the catchment. Wealden clay underlies the catchment, meaning that it has a flashy response to rainfall, causing flooding downstream, and the upper reaches are susceptible to drying out in the summer. Where the Beult joins the River Medway is the town of Yalding, which was heavily flooded in 2013, and where Southern Water abstracts water from the river for public supply. The company is looking to increase the resilience of this water source to drought.
To date, leaky woody dams, head water wetlands and land management measures have been delivered across five landholdings, with flood plain storage planned at a further two landholdings. A payment regime has been established where Southern Water pays landowners to host and maintain the nature-based ‘resilience’ measures. Monitoring and modelling indicates that there is a positive downstream benefit of measures delivered and planned in terms of peak flow reduction.
Catchment and nature-based solutions have several benefits compared to traditional grey infrastructure solutions, including helping to restore nature and biodiversity, sequester carbon and being less carbon intensive to deliver. However, their uptake and integration into mainstream approaches has been slow – why is this?
Gathering robust evidence on the efficacy of catchment and nature-based solutions remains a challenge, particularly demonstrating the collective effectiveness of small-scale solutions scattered across large areas or in constrained urban catchments. Scottish Water says that the uncertainty in the water quality outcomes of its catchment schemes is a challenge when assessing cost-benefits of different schemes.
Using hydrological and hydraulic modelling can help demonstrate impact at scale but requires detailed data on soils, landscape variability and drainage networks. And modelling is disproportionately expensive for small-scale interventions, becoming more cost-effective for informing option assessments at a catchment scale.
The Climate Change Committee (CCC) is very interested in developing the evidence base and is looking for ways to define and quantify what being ‘well adapted’ looks like, recognising the challenges given the place-based nature of adaptation.
An important resource is the ‘Working with Natural Processes Evidence Directory’ developed by the Environment Agency in the UK. This provides factsheets and case studies on various nature-based solutions like floodplain restoration, woodland management, and soil and land management. It also includes a review of confidence in their design and efficacy, with many nature-based solutions classed as low/medium confidence.
There is a lack of clarity around the different climate change scenario frameworks being used to model and develop natural solutions, for example representative concentration pathways (RCPs), shared socioeconomic pathways (SSPs) and pathways to 2°C versus 4°C warming. Organisations are increasingly using the "pathway to 2°C" and "pathway to 4°C" framing, as it may be easier for people to understand compared to the technical RCP/SSP terminology. For the CCC’s upcoming Fourth Climate Change Risk Assessment (CCRA4), scenarios will be framed around timelines such as 2030 and 2050, with a central and high climate scenario (the previous CCRA3 is here). This aligns with what organisations are being asked to report on in the next round of climate change adaptation reporting – this includes water companies and environmental regulators, as well as operators and public bodies across transport, energy and finance sectors.
Meanwhile, there is no standard approach for designing solutions to a specific climate change scenario. Water companies tend to use a range of climate projections, often using medium/central scenarios in their long-term planning. But for the design of assets, different climate projections are used – for example a catchment approach surrounding a reservoir considers a longer-term projection (4°C to 2080) compared to a pumping station kiosk which might only last to 2050.
Whatever scenario is used, there are concerns that the current pace of implementation may not be enough to keep up with the accelerating impacts of climate change and other pressures such as housing and development growth.
Whilst there is potential interest from green-minded finance institutions for providing upfront capital for nature restoration, securing revenue streams for the services delivered to pay back that investment can be challenging. Ultimately a robust business case must be made to the ‘buyers’ of ecosystem services, which includes water companies, as well as other organisations benefitting from increased resilience to floods, droughts and water quality challenges.
Long-term funding is also needed for maintaining and hosting measures. The environmental land management (Elm) schemes in England can help compensate farmers for adopting beneficial land management practices, including cover crops, field buffer strips and making space for wetlands, all of which support a catchment-scale, nature-based approach. However, new incentive models involving private sector funding are likely to be needed to allow farm businesses to remain commercially viable.
Traditional cost-benefit models don't favour natural solutions, as they are weak in the evaluation of their intangible benefits such as air/soil quality, amenity, biodiversity – many of which are realised over a longer timeframe. Natural solutions can also appear more expensive upfront due to a lack of experience in planning, delivery and managing associated risks. There are also challenges in quantifying the capital and operational costs of natural versus traditional solutions; it’s recognised that there is a need to bring natural assets into more traditional built asset management frameworks.
Assessing the multiple, longer-term benefits and outcomes delivered is important. Many water companies are taking a "multi-capitals approach" that accounts for natural capital, carbon, social capital, and other factors when assessing projects, not just their cost.
Meanwhile, the UK's Treasury Green Book project appraisal guidelines incorporate the valuation of ecosystem services, using quantitative estimates of the benefits of habitat restoration from existing studies. This allows the ecosystem service benefits to be included in cost-benefit analysis. Several tools exist to assess the benefits of blue-green infrastructure, including the UKGB’s NATURE Tool and Ciriabest, which draw from existing economic studies.
The Ofwat Innovation project ‘Mainstreaming Nature-based Solutions’ is building on these efforts to co-develop a ‘common value framework’ that will enable the water industry to make a comprehensive assessment of the benefits of natural assets.
The ‘Mainstreaming Nature-based Solutions’ project is also exploring and overcoming some of the regulatory and systematic barriers that hinder the wider adoption of catchment and nature-based approaches. These barriers include fragmented planning across sectors, but also within the water industry – with the focus on single regulatory targets rather than wider environmental outcomes.
Regulatory timeframes can be insufficient to plan and develop collaborative schemes and timescales for delivery are not always appropriate for natural approaches. This is compounded by challenges with planning-related consents and permits for some schemes – such as river and flood plain restoration – that can result in significant delays to scheme delivery.
There is also a feeling that there was a lack of incentivisation within the water industry for catchment and nature-based approaches in England and Wales during the latest business planning cycle (PR24). Ofwat, the economic regulator for water companies in England and Wales, is working to address this, as we describe below.
Successful implementation requires partnerships between public organisations, private entities, farmers/landowners and community groups.
Coordination across different water companies and local authorities is challenging as catchments do not align with administrative boundaries. The Independent Water Commission’s interim report (June 2025) noted the ‘lack of deliverable cross-sector planning across the water system’, with no formal regional arrangement, that brings together the necessary stakeholders with authority on investment and other planning. The Greater Manchester Integrated Water Plan is a positive demonstration of an overarching entity bringing together different parties to co-develop a catchment-based plan.
As demonstrated by the case studies, working with farmers and landowners is crucial because significant areas of land are needed to take a truly catchment-based approach. But land access can be complicated, and incentive mechanisms must be set up to ensure farmers remain commercially viable.
There may be challenges with getting the public on board with nature-based approaches, with potential lack of understanding about the benefits. However, findings from the Consumer Council for Water (CCW)’s public research, reported in 2024, showed that people expressed a preference for natural solutions rather than man-made ones – especially in the context of climate change. It also showed that once the impact on their water bill is removed, people are concerned about how long the solution will last, how long will it take to implement it and its environmental impact.
Potential strategies to improve engagement and buy in include making the value of ecosystem services explicit through accounting and disclosure; using visual cues like tree tags to educate the public; and involving local communities in the maintenance and ownership of green infrastructure. As the case study from Kent shows, incentivising landowners and farmers to host and maintain these solutions is critical. As the case study from Kent shows, incentivising landowners and farmers to host and maintain these solutions is critical.
We asked Ofwat about their efforts to encourage more catchment and nature-based approaches in the current asset management cycle (AMP8). A spokesperson said: “AMP8 represents the most environmentally focused price review ever, allowing £3 billion for green schemes (including £2.2bn for nature-based solutions) to be delivered between 2025-30.”
The Ofwat Innovation Fund is also supporting several projects to scale up the use of nature-based solutions, highlighted by the recent ‘From source to sea report'.
Ofwat is calling for companies to deliver more environmental and social value by exploring different approaches to their core activities. This includes considering the wider, long-term benefits of using a systems-oriented approach that involves understanding interconnected drivers across the whole water system and managing the enablers accordingly for implementing nature-based solutions. Ofwat is also encouraging wider use of green solutions through new environmental performance commitments and robustly monitoring data to ensure the effectiveness of spending. Promoting ‘best value’ investment also aims to encourage uptake.
The recent publication of the Independent Water Commission final report endorses this need for better and more integrated management across the water system, including the impact of farming and highways on water quality and usage. The UK government has confirmed this will not impact the 2024 price review (PR24) process, including the £400m allocated for the Innovation Fund for 2025-30, and that Ofwat will continue to operate during the transition to the new regulator.
Water is ultimately derived from the landscape, so adapting catchments at scale is vital to securing water supplies in a changing climate. Scaling nature-based approaches such as wetland and woodland creation, regenerative agricultural techniques and peatland restoration will bring biodiversity and carbon benefits, as well as increasing resilience of water supplies.
Despite challenges with uncertainty in outcomes, landowner compensation and regulations, there are reasons to be hopeful. The International Water Commission’s clear call for more integrated regulation and regional, joined-up planning of the whole water system should facilitate catchment and nature-based approaches at scale.
CIWEM will be engaging with the commission’s outcomes and ensuring that the positive direction in AMP8 with nature-based approaches is built upon in future water asset and adaptation planning. We’re hopeful that by 2030 we will really see the ‘wide and green’ mainstreamed in water sector investment plans.
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