ImpactAlpha, Mar. 23 – In financial markets, water is becoming the new carbon.
From early stage startups and corporate supply chains to public policy and municipal bond markets, water risks and opportunities are increasingly on the radar of investors.
In New York at the U.N.’s first dedicated water conference in 50 years, global leaders this week are hammering out a water action agenda of voluntary commitments, pledges and actions.
“We can build resilient societies and economies,” said Stuart Orr of World Wildlife Fund, “if governments and businesses urgently pursue policies, practices and investments that recognize – and restore – the full value of healthy rivers, lakes, and wetlands.”
Companies such as Ford, L’Oreal and Whirlpool, in a survey by CDP, identified $436 billion in unexplored commercial opportunities in water-related markets, products and services, and water-resilient supply chains.
Similar to carbon, hundreds of companies already set an internal ‘price on water’ to reflect the true cost of extraction, transportation, use and pollution. Those that have, according to CDP, report the financial benefit of water efficiency-related opportunities to be six-fold higher than those without a price on water.
Innovation and infrastructure
For water opportunities, look to early stage startups and municipal bond markets, say analysts at Environmental Policy Innovation Center.
Driving innovation in the sector are a flurry of startups including SimpleLab, Varuna, 120Water, and BioBot Analytic and funds such as Burnt Island Ventures and Echo River Capital.
Local municipal water utilities, largely financed through municipal bonds, account for roughly 85% of water infrastructure spending. Breckinridge Capital Advisors, Alliance Bernstein and Community Capital Management have track records with sustainable bond portfolios. Quantified Ventures has helped cities develop environmental impact bonds that link returns to investors with environmental outcomes.
Water and climate
At the U.N. conference, the Global Center on Adaptation and the African Development Bank are looking to push water solutions for climate adaptation up the agenda of the development community’s response to climate change.
To help replicate success in Asia and the Small Island States, the African leaders will share lessons from the Africa Adaptation Acceleration Program, which has influenced the design of more than $3 billion worth of development bank projects that aim to build resilience for up to 13 million people and generate 1.4 million jobs by 2030.