On March 28, Silver Leaf Partners hosted a symposium titled “Water: an Institutional Investment for the 21st Century.” A series of speakers representing fields ranging from professional services and corporate finance to law discussed water investment. The speakers noted that there is an increasing imbalance between water demand and supply. Speakers also stated that solving this imbalance requires investing in opportunities beyond technology and specifically in industries that have high water usage, including real estate. Finally, private-public partnerships have an important role in expanding water supply.
Lauren Koopman, the director of Sustainable Business Solutions at PriceWaterhouseCooper, opened the event by discussing current water demand and supply. In emerging countries, the growing middle class is set to increase demand for water through changing habits and food preferences that require higher water usage. Many developed countries, including the US, need to replace existing supply infrastructure. The current supply of water will not meet these projected demand increases, and the global demand and supply imbalance is set to worsen.
The investor perspective was offered by Marc Robert, a partner and COO at Water Asset Management. He noted that water is often mispriced due to the monopolistic relationship between utilities and customers and to municipalities’ regulation of the market to keep water prices low. This low price of water results in slow uptake of new technology as customers do not face the real price of supply. Possible opportunities that are not dependent on raising water prices include large water utilities that are well positioned for future demand and data management for high water-usage industries such as agriculture.
Additionally, there are industries other than water that can reduce water usage and offer investable opportunities. Lisa Davis, the Director of Investor Relations and Specialty Investment Originations at Pembrook Capital Management, discussed a novel way to invest in water through urban real estate. Investing in affordable housing, for instance, enables more people to stay in cities, avoiding movement into highly water-intensive suburban living. Also, developers can increase water efficiency through simple upgrades such as low-flush toilets. Savvy investors can identify innovative opportunities for water impact in a range of sectors across the economy.
However, the final speakers noted that public investment will be insufficient to meet the water infrastructure needs of the US, while private investors can benefit from public sector support to manage the risks of long-life water assets. Public-private partnerships (PPPs) enable the merging of the knowledge and capital of the private sector with the resources of the public sector. Daniel Spitzer, a partner at Hodgson Russ LLP, introduced the importance of PPPs. Historically, there has been a lack of commitment from the federal government to boost water spending. PPPs can mobilize private investment and companies to fill this public need. Bar Littlefield, CFO of Poseidon Water, offered an example, describing the company’s PPP with San Diego County Water Authority on the Carlsbad desalination plant. This plant supplies San Diego county with 50 million gallons of desalinated seawater per day. Appropriately developed PPPs can enable effective risk-sharing between private and public entities and create incentives for increased water investment.
The world faces increasing water demand, which current supplies will be unable to meet. Investors can impact the water field through both traditional investment in companies that are directly involved in water delivery as well as those that are improving water efficiency. The private sector can coordinate resources with the public sector in addition to investing privately to avoid future water scarcity. The symposium concluded with a clear message that private investment has a critical role to meet the increasing water imbalance.
Emma Currier is a Research Associate at Cornerstone Capital Group. Emma graduated with a Bachelors of Arts degree in Economics from Brown University in May 2016. While at school, she worked with the Socially Responsible Investing Fund and as a teaching assistant for the Public Health and Economics departments.