investment viewpoints

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

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



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.


important information.

This document has been issued by Lombard Odier Funds (Europe) S.A. a Luxembourg based public limited company (SA), having its registered office at 291, route d’Arlon, 1150 Luxembourg, authorised and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended; and within the meaning of the EU Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD). The purpose of the Management Company is the creation, promotion, administration, management and the marketing of Luxembourg and foreign UCITS, alternative investment funds ("AIFs") and other regulated funds, collective investment vehicles or other investment vehicles, as well as the offering of portfolio management and investment advisory services.

Lombard Odier Investment Managers (“LOIM”) is a trade name.

This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.

Neither this document  nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.

Source of the figures: Unless otherwise stated, figures are prepared by LOIM.

Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.

Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Funds (Europe) S.A prior consent. ©2019 Lombard Odier IM. All rights reserved.