Investing towards clean water and sanitation

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Investing towards clean water and sanitation
Développement durable
10
min.
Marie Fréville
19/9/22

Water is a cross-cutting issue that affects several sectors such as health, hygiene, food, education, environment

As a response to the climate and social emergency, the United Nations has established a set of sustainable development challenges to be met by 2030. These challenges are structured around 17 concrete goals for a sustainable and peaceful future for all people around the world. These goals, dubbed the Sustainable Development Goals (SDGs), are a universal call to governments, businesses, and individuals to address the global challenges we face, from poverty and environmental degradation to hunger and injustice.

In this article, KIMPA analyzes investment alternatives to contribute to the 6th SDG which aims to ensure universal access to safe drinking water, hygiene and sanitation.


Today, millions of people, mostly children, die every year from diseases related to inadequate water supply and lack of sanitation facilities. This is mainly due to poor infrastructure and can have a negative impact on other vital factors such as food security and the life choices of poor families, including the education of their children.

In addition, water stress has become a reality for many countries, and it is predicted that a quarter of the world's people will be affected by recurrent water shortages by 2050.

Nevertheless, it is important to highlight the progress made between 1990 and 2015, as the proportion of the world's population using an improved drinking water source increased from 76% to 90%.

Water is a cross-cutting issue that affects several of the other SDGs such as health, hygiene, food, education, environment and climate.

KEY FIGURES

Worldwide, 3 out of 10 people do not have access to safely managed drinking water services and 6 out of 10 people do not have access to safely managed sanitation facilities.

2.4 billion people lack basic sanitation facilities, such as toilets or latrines, which has implications for the spread of diseases. Waterborne and sanitation-related diseases remain a leading cause of death among children under five years old; more than 800 children die every day from diarrheal diseases due to poor sanitation



The economic impact of not investing in water and sanitation is 4.3% of GDP in sub-Saharan Africa. The World Bank estimates that India loses 6.4% of its GDP due to the adverse economic impacts and costs of lack of adequate sanitation facilities.

In addition, 2 billion people are affected by water stresses such as water shortages, a number that is likely to increase due to global warming. In households that do not have access to water locally, women and girls are responsible for collecting water in 80% of cases, increasing gender inequality.



In France, 99% of the population is connected to a public drinking water supply, nevertheless, in Guyana at least 15% of the population is not served by public drinking water networks and in Guadeloupe, 10% of the population is subject to weekly or bi-weekly cuts due to insufficient production to cover the needs of users.

On a global level, 80% of wastewater resulting from human activities is discharged into rivers or the sea without any depollution.

By managing our water sustainably, we also contribute to the other SDGs and can enable better management of food and energy production, as well as access to decent work and economic growth. In addition, we can preserve our water ecosystems and their biodiversity.


WHAT INVESTMENT SOLUTIONS CAN CONTRIBUTE TO THIS GOAL?

It is now possible to demand more from your investments than a risk-adjusted return. Impact investing means putting a third dimension at the heart of your investment strategy, that of having a positive impact on the world.



Regarding access to clean water and sanitation, the investment themes* are the following

  • Water infrastructure
  • Clean drinking water
  • Water conservation
  • Sanitation

Before moving forward with the presentation of investment solutions we have identified, we’d like to remind you that the ensuing presentation does not constitute a buy, sell, subscription or advice in financial investments offer from KIMPA. This presentation analyzes data and numbers without accompanying them with comments or value judgements regarding their worth for the reader. This article seeks to illustrate how an investor’s capital can contribute to solving global issues. The performance or numbers mentioned are estimates from asset managers communicated over a given time period and are therefore in no way a guarantee of the value of said investment in the future. If you wish to invest financially, please contact your financial advisor who will be able to guide you towards your objectives given your civil, fiscal, and asset situation while ensuring an adequate investment.

Water Infrastructure

Ensuring universal and equitable access to affordable drinking water by 2030 means investing in adequate infrastructure, providing sanitation facilities and promoting hygiene at all levels. Protecting and restoring water-related ecosystems is essential if we are to limit water scarcity.

This is the goal of the Private Equity Asia Environmental Partners II fund, managed by Olympus Capital Asia. The $300 million fund focuses on growth opportunities in renewable energy, pollution control and water management in China, India and Southeast Asian countries. Access to water is critical for agriculture, the economic sector that is most dependent on water availability, for irrigation, livestock and food processing.

The Allianz Global Water fund invests in global equity markets with a focus on companies with a strong commitment to water resource management or to improving the supply, efficient use or quality of water.

Clean drinking water

As mentioned above, one third of humanity is not connected to clean drinking water, which can have negative impacts on health and education, especially for girls who are mostly responsible for water supply.

The Invesco Global Water Fund invests over 90% of its assets in companies that create products related to water conservation and purification for individuals and industry.

On the direct deal side, Made Blue enables restaurants and offices to filter tap water and turn it into sparkling water, and uses corporate donations from each bottle saved for projects that provide access to clean water in developing countries.

Water Conservation

Water stress stems from the fact that more fresh water is drawn and used than is available. Water conservation promotes the sustainable use of water sources. This can be achieved by increasing freshwater resources or by better managing demand, including agriculture, industry and human needs.

The Pymwymic Healthy Ecosystems Impact Fund "PymHEIF" invests in innovative companies that use technology to conserve and restore ecosystems such as oceans and arable land, while providing a financial return. It targets an IRR of 6% to 8% over a 10-year period.

The Tortoise Global Water ESG Fund invests in companies that derive at least 50% of their revenue from water-related activities. These include infrastructure companies that help distribute and improve public water systems, as well as companies that produce equipment used to produce water such as pipes, pumps, vulvas, filters, etc. Investing in companies throughout the water cycle allows them to improve their systems and reduce the imbalance between water supply and demand.


Sanitation and hygiene services

According to the WHO, sanitation and hygiene services are fundamental to protecting public health. Universal access to sanitation services is essential to prevent diseases such as diarrhea or trachoma, improve nutrition and increase well-being.

25% of urban residents (1 billion people) live in slums, with substandard housing and very limited access to sanitation services. This figure could double by 2030 if we do not act. The social enterprise Sanergy, which could be a direct deal, builds sanitation solutions specifically adapted to these slums that are up to 5 times cheaper than mains sewerage, which require large infrastructure investments. Latrines are franchised to the communities and waste is professionally collected to be transformed into fertilizer. In addition, to improving the sanitation system, this company creates jobs in Kenya and allows for more sustainable agriculture, a true example of a social and circular economy that contributes to several SDGs at once (SDG 3: Good Health and Well-Being, SDG 6, SDG 11: Sustainable Cities and Communities).

What about now ?

If you want to become an impact investor, contact your financial advisors specialized in impact investing. They will be able to support you in measuring and connecting the three dimensions that are risk, return and impact, according to your property status and investor profile. Kimpa Impact Investing is a family office based in three cities in Europe :

  • Family Office Paris
  • Family Office Madrid
  • Family Office Marseille

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