The Berejiklian government should set a minimum 20 per cent water-recycling goal for Sydney as part of a wide-ranging plan to tackle the worsening heat-island effect baking the city's fast-growing western suburbs, a western Sydney thinktank said.

The Western Sydney Leadership Dialogue said having a 100 billion litre annual recycling target would also steer investment into a region likely to swell by at least a million people over the next two decades.

Not a drop to waste: Plunging dam levels is putting water recycling near the top of the agenda in Sydney. Credit:James Alcock

"We're the ones with the hotter temperatures, and the dying trees and the higher bushfire and grass fire impacts," Christopher Brown, the group's chairman, said.

He said only 6.7 per cent of the city's water was currently being recycled. With the right plans, adding such facilities in new suburbs could also create recreational water that could take the heat edge of suburbs that were often 10 or more degrees warmer than in the east.