SWW said it would reallocate the money from its Better Futures Fund, which is offering £2.5m to community groups over the next five years.
Events co-ordinator Kristy Poulton said the company had made great strides towards reducing pollution.
“We’ve already removed three-quarters of the top 20 spilling sites from 2023, reduced spills at bathing beaches by 20% over the past five years and are investing £760m over the next five years to reduce the use of storm overflows,” she said.
But, on Thursday, the Environment Agency gave South West Water a red rating for its environmental performance for the 14th year in a row, meaning it was “significantly below target”.
It said SWW was responsible for 189 pollution incidents in 2024, five fewer than the previous year.
Four were classed as “serious” – double the number recorded in 2023.