World Water Week is a global water conference held annually in August which convenes stakeholders across the private sector, the nonprofit space, and governmental agencies to discuss many issues related to water. New technologies are highlighted, new policies are debated, and case studies from all around the world are analyzed. This conference provides an interesting snapshot of future trends in the water space, and impact investors should be following these developments closely to help focus their investment decisions. The 2020 conference just ended, and in this post, I’ve outlined some of the key trends that impact investors should take away from this conference.
Resilience is a huge priority within the water world at all levels, and it was the most frequent theme discussed at World Water Week. The ongoing global crises around climate change, COVID-19, and political disputes related to cross-border water usage are encouraging innovation in humanitarian aid delivery, policymaking, public works, and private projects. Stakeholders are encouraged to consider the broad risk profile of their water usage and to account for potential vulnerabilities within water sources that may impact their operations or programming. There is significant demand for investment in technologies that will reduce water usage, improve information around water reporting, and facilitate a dynamic response to changing climate conditions in business operations.
Quantitative Sensing and Data Tools
This is the age of big data and the water sector is no exception. Several sessions were held regarding the importance of providing data to decision makers, including discussions of mapping technology, emissions detection systems, and hydrological models. The perception within the sector is that there is significant data scarcity in many areas, and the development and deployment of sensing, modeling, and other quantitative tools for analysis could meet many immediate needs. The sector is quite conservative – there aren’t many moonshots here – and it will likely take more time to drive adaptation of these new technologies than would be required elsewhere. There is an upside: many of the implementations will be quite “sticky” and could lead to significant account growth over time. An impact investor with a long enough time horizon could develop a robust portfolio of investments covering different geographies and market sectors.
Local problems require local solutions, and the sector is starting to recognize and invest in smaller-scale utility systems. Different kinds of businesses which focus on localized service provision, including water delivery networks and local water kiosks, were emphasized as lower-cost alternatives to the expensive capital investments of centralized utility networks. These solutions can be applied in different geographies and at different scope based on local conditions, which means that attractive investment opportunities can be found for a wide range of impact investors. In addition to financing, these businesses have various crosscutting needs where impact investors could add value beyond providing financial resources, including capacity development, provision of technical assistance, and implementation of other forms of best practices in the organization.
IoT and Digitization
Digitization of sensing technologies is a big area of focus, especially as sensors are developed with lower power requirements, longer battery life, and a more affordable cost. The sector is learning the value of connectivity to identify water loss in utility networks, to distribute water more accurately and effectively for agriculture, and to handle payments for utility providers in the developed world, among other applications. An impact investor could have a significant impact by bridging the gap between water utilities and the high-tech world of IoT.
Consider Responsible Water Use When Investing in Water-Heavy Sectors
The final takeaway for impact investors from World Water Week is that responsible water use is a key factor in the success of other kinds of investments, especially in water-heavy sectors like agriculture and mining. Investors in those sectors must consider incorporating responsible water stewardship frameworks, like the AWS Standard 2.0, into their programs. A proper site vulnerability assessment should be done to identify risks to water supplies before money is spent on expensive capital projects. Impact investors should also consider the broader social impact of the project on the wider community’s water needs, especially the needs of immunocompromised or otherwise vulnerable people. A longer-term focus on the sustainability of water resources is a key aspect of due diligence and must be at the core of an investment committee’s decision-making process.
CoI disclosure: My company’s partners in Inogen Alliance perform AWS certification and site vulnerability assessments for private clients.
In summary, World Water Week was a great opportunity for impact investors to learn about trends and opportunities in the water sector. There are many potential intersections of other innovative spaces, like IoT, with the more conservative water sector which could be explored and developed to have significant impact. The sector is ready for new ideas and is ripe for investment across a wide range of deal sizes, geographies, and focus areas.