Protecting Capital Value, Producing Risk: Thames Water, Infrastructural Valuation, and the Paradox of Financial De-risking

This paper considers a paradox that can emerge in governments’ efforts to reduce the risks of private investment in urban infrastructure: when de-risking becomes a driver of climate risk in its own right. We examine this paradox through ongoing potable water leaks in an increasingly drought- and heat-stricken United Kingdom, focusing on the exemplary case of Thames Water, a private utility that provides water to much of London and Southeast England. We suggest that an opaque valuation mechanism baked into the regulation of the English water system, regulatory capital value (RCV), has fuelled (a) a widening disconnect between the value of water infrastructure on paper and its material condition and (b) the water system’s growing indebtedness and physical deterioration. Through this case, the article underscores that how urban policymakers attract resources for large-scale urban adaptation measures matters just as much as whether they attract resources and should be approached with care.