For something that underpins virtually every aspect of our lives, water has for too long been “out of sight, out of mind” when it comes to investment, said Radhika Fox of North Star Strategy.
That is starting to change, as was evident on yesterday’s Call No. 63 on financing water infrastructure for water quality, community health and climate resilience.
The US bipartisan infrastructure law’s $50 billion for water infrastructure has sparked excitement in communities eager to seize the once-in-a-generation funding opportunity to upgrade their aging drinking water and wastewater systems — and lay a foundation for other projects.
Another opportunity: the Inflation Reduction Act’s Greenhouse Gas Reduction Fund, a $27 billion green lending program that, unbeknownst to many, covers clean water infrastructure among eligible projects.
Investors, green banks and foundations are identifying strategies and investable opportunities to maximize the catalytic government funds.
That starts with helping ensure that disadvantaged communities have the wherewithal to compete for the funds. As an official in the Environmental Protection Agency’s Water office, Fox carved out $50 million for technical assistance to help small communities compete for the funds.
“There are 1,000 communities right now that are getting that technical assistance, and for the first time, unlocking these federal funds,” she said.
“We see a lot of willingness to do things that communities have never done before,” said Rogelio Rodriguez of Water Finance Exchange, which works with small communities to devise strategies for financing water and other essential infrastructure. Rodriguez joined from Lufkin, Texas, where he and his colleagues were leading a workshop with community members.
“We’ve helped communities complete water loss plans, conservation plans, contingency plans. We helped them shore up their financials. We’ve done rate analysis, we’ve done cash flow pro formas to put them in a position where they could apply for this money,” Rodriguez said. That exercise, he added, will also position communities to tap municipal bond markets and private capital.
WaterFX has filled market gaps with funds to enhance the credit of disadvantaged communities, make low-cost loans for pre-development project work, and provide grants for disadvantaged communities’ needs, such as a broken pump.
Water pipeline
Panelists also keyed in on the Greenhouse Gas Reduction Fund. “The critical thing for us to be doing right now in the water sector is to be feeding a pipeline of water infrastructure projects that can measurably reduce greenhouse gas emissions” to the coalitions of community lenders charged with distributing the funds, said Fox, referring to the Coalition for Green Capital, Power Forward, and Climate United.
Quantitative Ventures is on the case. The Washington DC-based nonprofit that designs investable impact solutions is working with ten green banks, from Missouri to New Orleans to Hawai’i, to develop water financing programs and to line up eligible projects. To assess demand, Quantified Ventures issued a public call for projects.
It received $7 billion worth of projects nationally, $4.5 billion of which was as yet unfinanced. “There are a lot of projects out there,” said Quantified Ventures’ Shaun O’Rourke. “This is the most robust pipeline of investable, nature based-solutions and water- based projects that has been compiled.”
The firm is screening the projects for investability, with the goal of bringing them to green banks across the country to finance. “Now that we’ve been able to demonstrate that the deal flow is out there, we’ve been having really productive conversations with a variety of different investors,” said O’Rourke.
Panelists pointed to opportunities for impact investors to participate in credit enhancement and insurance pools to boost access to capital markets for disadvantaged communities.
There are also opportunities to invest in specific projects, such as water reuse, desalination, and rain catchment. Fox pointed out the opportunities for investing behind new EPA regulations on PFAS, the “forever chemicals” that have infiltrated water supplies, and a forthcoming rule on copper and lead.
“There’s going to be thousands and thousands of drinking water agencies around the country that are going to have to test for PFAS, report on it,” and remediate the situation, she explained.
That translates into “a huge market opportunity” for more efficient ways to detect, treat and destroy PFAs in a safe manner. “Those are all areas for innovation, for investment with a huge return on the other side,” said Fox.
Among the Agents of Impact on The Call:
David Rankin with the Great Lakes Protection Fund, Paige Dickman with Align Impact, Maddie Vann with The Resiliency Company, Chris Larson from Alder Point Capital Management, Laura Mondragon of the Montgomery County Green Bank, Somalisa Sahoo at Cogent Consulting, Holden Lee with Berkeley’s Haas School of Business, Shaska Chirinosat the Principles for Responsible Investment, Ren Robbins with NGO Atma Connect, David Cooper of Mission Driven Finance, Walker Krebs with Sorenson Impact Institute, Diane Schrauth of New Jersey Future, Jackie Logan with Raise Green, Eric Mong with Capricorn Investment Group, Milton Lore at Open Capital, Margot Walker of Lotus Water, and Hubert Danso of the African Green Infrastructure Investment Bank.
ImpactAlpha’s “Muni Impact” is sponsored by Robert Wood Johnson Foundation.
