Ofwat publishes final Climate Change Principles for water sector

Ofwat has published its final Climate Change Principles, setting out how water and wastewater companies in England and Wales are expected to address climate change through both mitigation and adaptation.

Released in February 2026, the principles follow a discussion paper issued in July 2025 and a subsequent consultation with water companies, environmental organisations, customer bodies and other stakeholders. The final document reflects feedback received during that process and is intended to guide company decision-making over the long term rather than introduce new prescriptive requirements.

Ofwat describes climate change as one of the most significant risks facing the water sector, affecting water availability, asset resilience, service reliability and the natural environment. At the same time, the regulator highlights the sector’s role in contributing to national decarbonisation objectives, given its energy use and emissions profile.

Principles-based approach

Rather than setting detailed targets or rules, Ofwat has opted for a principles-based framework. This is designed to provide flexibility for companies to respond to local circumstances while promoting greater consistency and transparency across the sector.

The principles emphasise the need for companies to align their climate action with government policy and long-term targets, including commitments on net zero greenhouse gas emissions. Companies are expected to use credible scenarios and evidence to assess climate risks and opportunities, and to be transparent about the pathways they choose.

Integration into governance and planning

A central theme of the final principles is that climate change should be embedded into everyday decision-making, rather than treated as a standalone issue. Ofwat expects boards and senior management to have clear oversight of climate-related risks and responses, with these considerations integrated into business planning, investment decisions and risk management frameworks.

The regulator also stresses the importance of considering mitigation and adaptation together, recognising that choices made to reduce emissions can have implications for resilience, and vice versa.

Resilience, innovation and the circular economy

The principles encourage companies to take a long-term view of asset and system resilience, accounting for future climate conditions as well as current performance. This includes consideration of both existing infrastructure and new investment.

Ofwat also highlights the role of innovation and circular economy approaches, such as improving resource efficiency, reducing waste and making better use of by-products, as part of the sector’s response to climate change.

Measurement, reporting and engagement

Another key aspect of the framework is measurement and accountability. Companies are expected to monitor and report on progress in a way that is clear and accessible to stakeholders, supporting trust and comparability across the sector.

Active engagement with customers, communities, environmental groups and other partners is also emphasised, particularly where companies face trade-offs between costs, environmental outcomes and levels of service.

Regulatory context

While the principles do not introduce new licence conditions or immediate compliance obligations, Ofwat has made clear that they will inform its wider regulatory work. This includes future price reviews, resilience assessments and its ongoing scrutiny of company performance.

The publication of the final principles sits alongside broader regulatory and government expectations for the water sector to plan for long-term challenges, improve environmental performance and deliver resilient services in the face of a changing climate.