With Water Crisis Here, Funds Part of Solution, Boccaletti Says

  • Water no longer marginal, now fundamental to global economy
  • Companies realize water scarcity is business continuity issue

With $10 trillion of infrastructure needs between now and 2030 amid climate change, rising seas and growing populations, water is becoming a fundamental risk to the global economy, according to the world’s biggest non-profit conservation group.

“The crisis is becoming very material, we’re in it now,” Giulio Boccaletti, global managing director of water at The Nature Conservancy, said at the World Water Week conference in Stockholm.

Boccaletti highlighted California, in the throes of a debilitating four-year drought. The “richest piece of land on the planet” is now going through the realization that no matter how wealthy, there may not be enough resources to make the problem go away, he said.

California “cannot afford the kind of infrastructure you need to support its economy, which is why the water crisis is already happening,” Boccaletti said. He also cited drought-prone Australia, which along with California is exhausting innovative and affordable options to support its water needs beyond what it’s been doing for 100 years. 

There’s a “big question mark” on how to finance more of what’s needed to counter climate change, Sasja Beslik, head of responsible investments at Nordea Asset Management, said in an interview in Stockholm. NASA yesterday said the world’s oceans are rising faster than predicted, almost 3 inches since 1992 and in some areas as much as 9 inches, as a result of warming temperatures from the burning of fossil fuels.

“One of the biggest challenges isn’t to find the new money but to reallocate investment strategies so they also include environmental, social and governance issues,” Beslik said.

Water Funds

With water scarcity and supply issues a risk to business continuity -- from value chains in beverage manufacturing to asset risks in mining -- utilities and companies such as Coca-Cola Co. and SABMiller Plc are turning to new ways to finance protection and reforestation. One such avenue is water funds, Boccaletti said.

The funds enable downstream users such as beverage companies and brewers to put resources into a vehicle that’s governed with local communities to invest in conserving a watershed. According to The Nature Conservancy, it’s helped create 20 operating water funds in seven countries, with 40 more in design, “leveraging more than $300 million in public and private commitments to water funds."

The water funds interest companies because they’re starting to look like a product, with predictable costs and increasingly predictable answers, Boccaletti said. A key attraction is how the funds “can be reproduced in many different places in the same way.”

Which helps because the business model for water such as how upgrades and new efficiencies are paid for and by who isn’t getting much clearer, according to Boccaletti. That’s “why water funds are so important because at least in that segment there’s a mechanism that seems to be working.”