Why should water be so high up on investors' agenda?

investment viewpoints

Why should water be so high up on investors' agenda?

Changing demographics and climate disasters are putting water infrastructure under increasing pressure. There are compelling reasons for water efficiency and improved water management to be placed high on investors’ agendas.

The UN estimates that as many as 4.5 billion people globally are without access to adequate sanitation, 2.1 billion lack access to clean drinking water and flood damage to urban property is estimated to cost $120 billion, annually. By 2050, rising sea levels could cost $1 trillion per year in economic damage.

In 2018, the water sector gained significant traction following an increase in the issuance of impact bonds funding improved water management. Affirmative Investment Management (AIM) has long included pure play bonds in its SPECTRUM-approved investment universe such as UK water utility, Anglian Water and Severn Trent1, and members of AIM’s verification and impact team recently conducted site visits for water projects in the UK and the Netherlands.

Ten percent of LO Funds - Global Climate Bond portfolio weighted use of proceeds were allocated to the water sector last year.

 

Water innovation in the UK 

UK water companies have been extremely proactive in driving sustainable solutions to the various challenges they’re facing. AIM was able to witness some exciting new technologies first hand during a visit to Anglian Water’s Innovation Shop Window.

Anglian Water is endeavouring to promote a culture of open innovation and collaboration across the supply chain. Located in Newmarket, Suffolk, the company’s Innovation Shop Window showcases emerging technologies and various schools of thought to facilitate knowledge building and the trialling of new concepts.

Anglian Water is currently working with more than 105 partners, on 101 projects designed to tackle challenges across the whole industrial water cycle. The most promising projects will subsequently be implemented on a large scale.

Some of the more successful innovations have already been rolled out across the business: state of the art sewer robots and drones with thermal imaging cameras are deployed to locate hidden water leaks; smart meters have been installed at nearly 6,000 properties across Newmarket to help customers save money and water; and 3D models and virtual reality technology have been instrumental in the planning of large-scale engineering schemes. In support of the company’s decarbonisation objectives, Anglian Water’s new mobile sludge unit, installed at wastewater treatment plants, has allowed the company to reduce the number of tanker journeys required by more than 50%.

 

Water risk and opportunities in Holland

AIM was one of half a dozen investors invited to participate in seminars with water experts on a visit water-related projects in the Netherlands. With 26% of land below sea level and over half of the country at risk of flooding due to rising sea levels and changing weather patterns, effective water treatment and management is a national priority.

In 2018, AIM invested in the NWB Bank Green Bond framework, which provides low cost loans to Dutch water authorities, including Rijnland District Water (RDW).

Water authority Rijnland District Water (RDW) manages the Katwijk Wastewater Treatment Plant (WWTP) near Leiden in the west of the country. The WWTP processes water from the combined local sewage systems. Originally built 43 years ago, the site’s ageing infrastructure made it one of the least sustainable water treatment plants in Rijnland.

Treatment of household water accounts for 3% of global electricity consumption. RDW’s project addresses the high energy use in the water purification process at Katwijk, by first filtering out solids from sewage water and then transferring it to an aeration tank into which oxygen is injected.

RDW partnered with a local engineering company WaterTechniek Twente, to determine the best new technology for improved efficiency in this process. The hybrid aeration solution reduced the energy required to pump energy through the tank by 40% and eliminated the use of chemicals by 100%.

 

Click here for the full LO Funds – Global Climate Bond 2018 Impact Report

 

sources.

1 Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document. The case studies provided in this document are for illustrative purposes only and do not purport to be recommendation of an investment.

 

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