Tag: Impact Investing

In January 2021, I wrote in GreenBiz that the year ahead for water could be viewed as the roaring 20s and as a period of creative destruction. As I reflect on 2021 and the year ahead, I am doubling down on this view with three trends that are proof points that water innovation is accelerating and disrupting the status quo.

Extreme Decentralization is Moving into your Home

The move to diversify from centralized water and wastewater treatment systems has been underway for years. This is not to imply that centralized systems will be completely replaced. Instead, there are now alternatives for water supply and treatment.

The trend to provide options to centralized systems is accelerating with a recent move to technologies that can be viewed as “extreme decentralization,” as outlined in this essay, “The Third Route: Using Extreme Decentralization to Create Resilient Urban Water Systems.” The authors frame a complementary path to centralized systems that includes “household-based personalized water systems.”

In my view, these personalized water systems include technologies for off-grid water supply systems (such as the panels from Source), home water reuse (including technologies from Hydraloop) and real-time water data information sources for quantity (Conservation Labs) and quality (Safespout).

Off-grid water supply, reuse and home water performance will be enabled by these real-time data digital technologies. View these technology categories as augmenting centralized water and wastewater treatment systems and delivering access to water where centralized systems are unavailable. An important initiative in this trend is the work of the 50 Liter Home Coalition which has a vision to create abundance for water through the adoption of advanced water technology in the home.

Exponential Technologies are Taking Off

Deloitte defines exponential technology as “innovations progressing at a pace with or exceeding Moore’s Law” that “evidence a renaissance of innovation, invention and discovery … [and] have the potential to positively affect billions of lives.”

Xponential Works adds that “exponential technologies are those innovations that continue to advance exponentially, with disruptive economic and lifestyle effects.”

Examples of technology categories in the water sector include digital technologies and advanced materials. Digital technologies encompass artificial intelligence, augmented and virtual reality (AR, VR) and robotics.

The applications of these technologies are appearing in the utility and private sector to vastly improve resource use, reduce carbon emissions and manage infrastructure, manufacturing assets and supply chains. Company examples include Plutoshift and Fido Tech, the work of KWR Water and WatchTower Robotics. Advanced materials are being applied in off-grid water supply technologies (such as Source) and treatment membranes (evove).

Typically, water technology innovation is linear: slow and evolutionary not revolutionary. But these exponential technologies are disruptive, not just evolutionary, innovations that will transform public sector and private sector water management. One just has to look at how exponential technologies have disrupted other sectors such as the energy sector. The rise of residential solar is one example that is illustrative of what could happen for water.

The Hydration Revolution

This is not an indictment of tap water but instead, a recognition that consumers are moving to alternative hydration methods and in-home water treatment solutions. The reality is that an estimated 60 million Americans don’t trust tap water. The reasons are complex but can be broken down into perceived risks from tap water, such as the taste; real risks such as lead contamination; and brand preferences for bottled water. Regardless of the motivation, this lack of trust in tap water is driving innovation and consumer preferences about how they hydrate.

According to research by Asher Rosinger, Anisha Patel and Francesca Weaks, Americans don’t trust the water from their tap. The two state, “Taking that into account that an estimated two million Americans don’t have access to safe drinking water, about 59 million people have tap water access from either their municipality or private wells or cisterns but don’t drink it. While some may have contaminated water, others may be avoiding water that’s actually safe.”

Since the 2013 to 2014 timeframe (just prior to the lead crisis in Flint, Michigan’s water system), the prevalence of adults who don’t drink their tap water has increased by 40 percent. The number of children not consuming tap water rose by 63 percent. The authors reference a 2020 study by anthropologist Sera Young, which found that tap water avoidance was declining before the Flint water crisis that began in 2014. In 2015-2016, however, it started to increase again for children.

The implications of this trend are that consumers seek alternatives to tap water and installing in-home treatment systems. They are attracted to “personalized water” options (such as SodaStream or rocean) and tracking hydration as part of the trend in personal wellness (via bottles and apps such as Rebo). While these supplies will not replace traditional water utilities, they will challenge them to manage customer perceptions and consider potential partnerships with alternative hydration businesses.

What This All Means: Investors Just Add Water

The rush is on to invest in the water sector. Disruption of the water industry (I view the “water industry” as very broadly defined beyond water utilities and water technology providers) is accelerating and being driven by investors.

This increasing interest is being driven by the impacts of climate change on our hydrologic cycle resulting in water scarcity in places such as the American West. Organizations such as Nasdaq and the Financial Times (Water stress drives investor interest to address supply shortage) recently reported on investing in water in response to water-related risks to the private and public sectors.

Investors are looking for innovative solutions to address water scarcity, poor quality and access to safe drinking water. It is likely that most investments will be in evolutionary innovation technologies; however, some will go towards hydrating disruptive technologies and new business models such as water as a service.

These three trends, fueled by increasing investor interest, will continue to challenge and disrupt the water sector status quo. The traditionally slow pace of innovation and scaling of new technologies and business models is giving way to faster adoption in response to the harsh reality of the impacts of climate change; democratized access to data and actionable information; and failing aging infrastructure and outdated public policies.

Originally published in GreenBiz on January 12, 2022

Article by Will Sarni, founder and CEO of water strategy consultancy, Water Foundry. He is also the CEO of the Colorado River Basin Fund, the first placed-based water-focused investment fund in the United States.

Prior to Water Foundry, Sarni was a managing director at Deloitte Consulting where he established and led the water strategy practice. He was the founder and CEO of Domani, a sustainability strategy firm, prior to Deloitte.

Sarni is the author of five books: Corporate Water Strategies;  The Water Tech Book;  Beyond the Energy-Water-Food Nexus;  Water Stewardship and Business Value;  Creating 21st Century Abundance Through Public Policy Innovation.

Sarni is a co-founder of WetDATA and a host of the podcast, The Stream with Will and Tom. He is a board member of Flowater, Silver Bullet, Project WET and the Rocky Mountain Rowing Club. He was the Chairman of the Scientific Advisory Board for the WAITRO Global Water Innovation Summit 2020 and was on the Scientific Program Committee for Stockholm World Water Week from 2013 through 2019. His advisory work includes working with the 2020 X-PRIZE (Infinity Water Prize), as a Bold Visioneer for the 2016 X-PRIZE Safe Drinking Water Team and a Technical Advisor for the Climate Bonds Initiative: Nature- Based Solutions for Climate and Water Resilience. He is also on the Editorial Board of the Journal of Water Security. 

Visit WillSarni.com for more information.

As You Sow and Corporate Knights recently released their 9th update of the Carbon Clean 200, a list of 200 publicly traded companies worldwide that are leading the way among their global peers to a clean energy future.

Key Findings Include:

• Clean200 companies generated a total return of 107.09% beating the MSCI ACWI broad market index (103.15%) and MSCI ACWI/Energy Index of fossil fuel companies, (31.67%) on Total Return Gross — USD Basis from the Clean200 inception of July 1, 2016 to Jan. 31, 2022.
• $10,000 invested in the Clean200 on July 1, 2016, would have grown to $20,709 by Jan. 31, 2022, versus $20,315 for the MSCI ACWI broad market benchmark and $13,167 for the MSCI ACWI/Energy benchmark for fossil fuel companies.
• 10 companies that contributed the most to the Clean200’s outperformance over the past year were primarily from China, the U.S., South Korea, and Canada and include electric vehicles, environmental protection, energy conservation solutions, and green energy themes.

“In 2016 we created the Clean200 in response to investors saying, ‘if we divest fossil fuels there is nothing to invest in,’” said Andrew Behar, CEO of As You Sow and report co-author. “The Clean200 has demonstrated consistently that the clean energy future is the clean energy present. This year, the scale and global diversity of leading companies continue to expand and redefine the term cleantech to be any company that has products and services that will reduce demand for fossil fuels and water.”

The top 10 companies on the list by revenue include Apple Inc., which offers sustainably-certified phones and laptops; Alphabet Inc. whose operations are 100% powered by renewable energy; Intel Corp.; Taiwan’s TSMC for low-energy microchip solutions; and Iberdrola SA for clean power generation. Thirty-two countries are represented in the Clean200, including the U.S. (53), Canada (18), China (16), France (12), and Japan (11).

“Without major tech outperformers like Amazon and Microsoft or any of the fossil fuel stocks now surging on the back of high oil prices, the Clean200 still managed to outperform both the blue-chip and oil and gas indices over the past five years, signaling the market’s confidence in their mojo to take our economy forward post-pandemic,” said Toby Heaps, CEO of Corporate Knights and report co-author.

The Clean200 utilizes Corporate Knights Clean Revenue database which tracks the percent of revenue companies earn from clean economy themes including energy efficiency; green energy; electric vehicles; banks financing low-carbon solutions; real estate companies focused on low-carbon buildings; forestry companies protecting carbon sinks; responsible miners of critical materials for the low-carbon economy; food and apparel companies with products primarily made of raw materials with a significantly lower carbon footprint; and Information and Communications Technology (ICT) companies that are leading the way on renewable energy while also being best-in-sector according to currently accepted privacy benchmarks.

The list excludes companies that are flagged on As You Sow’s Invest Your Values suite of mutual fund transparency tools that identify companies involved in fossil fuels, deforestation, weapons, gender inequality, tobacco, and the prison industrial complex.

“We will continue to track and share the emergence of this economic powerhouse,” Behar continued. “There is now clear financial evidence showing a broad spectrum of companies and market forces making the economic transformation, which is our greatest hope in controlling climate change.”

As You Sow is the nation’s leading shareholder advocacy nonprofit, with a 30-year track record promoting environmental and social corporate responsibility and advancing values-aligned investing. Its issue areas include climate change, ocean plastics, pesticides, racial justice, workplace diversity, and executive compensation. Click here for As You Sow’s shareholder resolution tracker.

Corporate Knights is a research and media B Corp that seeks to provide information that empowers people to harness markets for a better world.

As You Sow and Corporate Knights are not investment advisors nor do we provide financial planning, legal, or tax advice. Nothing in the Carbon Clean 200 Report shall constitute or be construed as an offering of financial instruments or as investment advice or investment recommendations.

We find ourselves in uncharted and unfamiliar territory. Again.

The worlds we collectively inhabit — corporate sustainability, sustainable finance, the circular economy, climate tech — are all reaching inflection points, growing and changing faster than many could have imagined. Along the way, they’re roiling industries, companies, jobs and career paths — mostly for the better but also in a be-careful-what-you-wish-for kind of way.

The Age of COVID has coincided with the rise of nearly every aspect of sustainable business: companies’ commitments to achieving net-zero greenhouse gas emissions; the mind-blowing uptake of green bonds and sustainability-linked loans; the inexorable growth of renewable energy, alongside its declining price; the mainstreaming of electric vehicles; the rise of concern about biodiversity loss and its economic impact, and more.

Indeed, the past two years of pandemic life seem to have left sustainable business relatively unscathed. With good reason: Despite our self-imposed isolation, the klieg lights focused on companies’ environmental and social commitments and performance have grown increasingly brighter and hotter, in lockstep with the rise of concern about the scale, scope and pace of change. With the signs of a changing climate becoming ever more apparent — and costly — the business world is finally recognizing that sustainability is not merely a nice-to-do activity.

Which is not to say that companies are solidly on the case. True, the pace of change has quickened, with more companies making bigger commitments, but it’s far from what’s needed to address the challenges before us. Carbon emissions, which dropped in tandem with the tanking global economy during 2020, resumed their relentless climb in 2021, faster than many scientists predicted, according to the Global Carbon Project. And scientists expect emissions to rise even further in 2022 as the global economy continues to pick up steam.

That’s just one data point, albeit a significant one, casting a pall over the corporate sustainability landscape. There’s the continued loss of biodiversity spurred by land-use changes from economic growth coupled with the ravages of a changing climate. There’s the ongoing loss of fisheries and marine ecosystems upending the seafood industry. There’s the growth of water stress due largely to population and economic growth: Just over half — 52 percent — of the world’s projected 9.7 billion people will live in water-stressed regions by 2050, with most in developing economies, according to the MIT Integrated Global System Model Water Resource System.

That’s the duality in which the world of sustainable business exists: Impressive progress, innovation and achievements, but nowhere near enough to stem the tide of the terrifying environmental and socioeconomic challenges ahead.

Still, there’s no denying that the pace of change is quickening inside companies. The number of consortia, partnerships, initiatives, and innovations can be overwhelming, even breathtaking at times. Whereas not long ago, the center of gravity could be found inside a handful of sectors — consumer goods, information technology, retail and apparel come to mind — today, there’s no part of the economy untouched by sustainable innovation.

Witness the rise of climate tech, shorthand for a stunning array of technologies and solutions aimed at decarbonizing business and commerce. They represent the convergence of leading edge thinking in artificial intelligence, blockchain, green chemistry, synthetic biology, advanced materials, remote sensing and other disciplines and technologies. Individually and in concert, these future-facing advances stand to reinvent large swaths of the economy.

We’re already seeing the fruits of those innovations: plant-based proteins, textiles and chemicals; advanced, low-carbon steel, concrete and other materials; the electrification of buildings and vehicles; cleaner and more resilient energy systems; adaptive, climate-resilient infrastructure.

One challenge, and opportunity, is whether and how these innovations scale quickly enough to offset the growing global economy, and whether they will be accessible to those at every rung of the economic ladder — in particular, communities, businesses and individuals in rapidly growing economies in Asia, Africa and South America.

It won’t be easy. If the inequitable distribution of COVID vaccines is any indication, the world’s richest countries are ill-prepared to adequately care for those in need. To the extent that we can view the current pandemic as a peek into the kinds of global emergencies we may increasingly be confronting — well, it’s a sobering reality check.

One bright spot in all this is the world of finance, which has finally recognized both the business risks and opportunities of a climate-changing world. The world’s largest banks, insurance companies, institutional investors and pension funds are increasingly moving funds out of polluting industries — or, at least, companies within those industries deemed to be least prepared to meet the new environmental realities — and into companies and funds that seem to be part of the solutions.

It’s a highly imperfect process. The ability to accurately distinguish climate leaders from laggards continues to befuddle the world’s largest investors and financial markets. Many of the banks that profess to be shifting funding away from polluting companies and industries are still backing coal mines and oil wells. Investment funds purporting to focus on companies that score well on environmental, social and governance (ESG) issues still have polluting companies in their portfolios.

It will be a long, slow process to shift completely away from the bad to the good, assuming we can agree on what “good” even means. The sobering challenge: We don’t have that kind of time.

One area of growing focus are companies’ lobbying efforts and political support of legislation and public policy that can accelerate the kinds of changes scientists say we need to make. For years, companies willing to stand up against the well-funded fossil-fuel lobby were relatively few and far between. That’s just beginning to change. The pressure of activist and advocacy groups pushing businesses to get off the sidelines and take a stand is rising. If corporations do — and that’s a big “if” — the private sector could further burnish its credentials as a positive force for change.

However, if businesses opt for short-term profit over longer-term survival, it will be that much tougher to make progress. Either way, the story of corporate climate advocacy will be one of the more interesting to watch in the year ahead.

There are other story lines we’ll be following in 2022 and beyond, some of which are detailed in this report: the challenges of driving sustainability and decarbonization through company supply chains; how “true zero” is becoming the new mantra for clean-energy buyers; regulators’ newfound focus on sustainable finance and ESG reporting; the professionalization of the circular economy; the growth of resale in consumer markets, and more.

There’s plenty to be hopeful about in 2022 — and even more to instill fear for our collective future. Which will predominate?

The Top Sustainable Business Trends 2022:

• HR Ups Its, Sustainability Game
• Resale Finds Its Second Life
• The Circular Economy Gets Professional
• Biodiversity Meets the, Bottom Line
• Sustainability Gets Baked into Food Design
• Circular ‘Mining’ Reaches for the Mainstream
• Supply-Chain Data Gets Granular
• Clean Energy Aims for True Zero
• Regulators Rein in the ESG Bandwagon
• Logistics Gets on a Sustainable Track

Download the free State of Green Business 2022 report to explore the top sustainable business trends of 2022, as well as two new components of this year’s report: the state of green jobs and skills, developed in collaboration with LinkedIn, and the state of net zero, by S&P Global Sustainable.

Article by Joel Makower, Chairman & Co-Founder, GreenBiz Group

(Above image – the Milwaukee skyline and Lake Michigan. Photo credit: Peter Zuzga, courtesy of The Water Council)

Water risk hasn’t received the same attention as carbon emissions in sustainable investing, but if you’re not paying attention to water, you’re already behind. Droughts, floods, deteriorating infrastructure, poor water quality and more are materially impacting companies’ direct operations and supply chains across the globe. The changing climate will only accelerate the manifestation of these water risks.

“Besides climate change, I don’t think there’s a more important issue in terms of investing,” said Julie Gorte, senior vice president for sustainable investing at Impax Asset Management. “We’ve all seen companies take material hits because of drought. There’s hardly any place now where water is immaterial to an investment decision.”

Companies are good at monitoring, quantifying, and reporting on withdrawals and usage, but exposure and response to water risks and opportunities is trickier to measure. Businesses deal with a variety of risks related to water quality and quantity depending on how they use water and where their facilities and supply chains are located. While many companies have pledged their commitment to water and frameworks exist to adopt water stewardship practices at the site level, there is a critical execution gap between the two.

The Water Council, an internationally acclaimed nonprofit dedicated to freshwater innovation, created WAVE to fill that gap. WAVE – Water Stewardship Verified – provides a methodology to develop thoughtful strategies, set meaningful goals and take impactful action on water across the enterprise, concluding with independent verification that the company has built a credible foundation of knowledge on which to base its water stewardship work. Based on global best practices, it sends a strong message to investors, customers and employees that the company is methodically defining its exposure to water risks and taking a strategic approach to mitigating them across the enterprise. Ultimately, the company is better able to translate credible water action into verified external reporting.

The Water Council has helped companies from large multinational corporations to small family-owned businesses mitigate water-related risk and improve water stewardship outcomes. From 2015 to 2021, The Water Council served as the North American Regional Partner for the Alliance for Water Stewardship, helping build the business case for water and creating the world’s first credentialing program for water professionals.

The WAVE program, launched earlier this year, follows a six-step process for a company to understand its water uses, impacts and risks; approve a corporate water stewardship policy; prioritize sites to mitigate water-related risk; and communicate plans and goals.

“WAVE helps cut through the complexity and gives companies a good entry point into water stewardship by demystifying key concepts and best practices,” said Matt Howard, vice president of water stewardship at The Water Council. “We want to lower the barrier to entry for companies starting a water stewardship plan.”

While the program evaluates water-related risk, it also addresses opportunity by engaging with stakeholders in watersheds where the company operates.

“When you get into true water stewardship, then you’re proactively looking for ways to address those common challenges and common opportunities that people share within the same watershed,” Howard said. “The upside is long-term security and sustainability of the water resource.”

All of this demonstrates the need for investors to improve their evaluation of company water performance. If companies and investors don’t recognize water risk and opportunity, they’re opening themselves up to surprise and uncertainty in the future, Gorte said. “You want every company to be aware of its dependence on and vulnerability to water throughout the supply chain,” she said. “But you also want companies to be aware that there are opportunities.”

Independent verification is key to the WAVE program, said Rae Mindock, manager for responsible water practices at SCS Global Services. Since 1984, SCS Global Services has been a leader in the field of sustainability standards and third-party certification. Many companies are trying to capture the Environmental, Social and Governance (ESG) investment dollars flooding the market, but often they aren’t verifying their sustainability work, leading to a component of greenwashing, Mindock said.

“With WAVE, that component is gone,” she said. “When you work with people who are knowledgeable about stewardship combined with people who are knowledgeable about verification, that’s a program we can get behind and be proud of.”

Upon verification, WAVE participants are entitled to use a seal and claim indicating the company has assessed water-related risk across the enterprise, identified the highest water-related impacts using credible water-related data, and implemented best practice in improving water stewardship performance.

The Water Council pilot tested the program with public companies A. O. Smith Corporation, Badger Meter, Nutrien and Watts Water Technologies.

The WAVE process helped Nutrien, a fertilizer producer and the world’s largest provider of crop inputs, services and solutions, think about the watersheds it operates in, not just water use at its own sites, said Mike Nemeth, senior advisor for agricultural and environmental sustainability. It also helped the company develop a corporate water stewardship position and pathway for Nutrien to participate in water stewardship more broadly in the agriculture sector.

“From the very top of our organization all the way down, we knew exactly what we were saying about water and how we were going to act to be good water stewards in our sector,” Nemeth said.

As a result of the program, Nutrien created a cross-functional water targets team committed to developing context-based water targets and identified watersheds with higher water-related risk that they can prioritize for action.

Watts, a global water solutions provider, got connected to WAVE through Impax, one of its investors, as it sought to continue improving its water stewardship. Through the program, the company chose eight sites to prioritize for water stewardship action based on water withdrawals, wastewater discharges and local watershed risks.

Robert J. Pagano Jr., president and CEO of Watts, said that his company’s participation in the WAVE “allowed us to better understand how we affect water resources, both upstream and downstream, at eight of our worldwide facilities.”

Water is a unique and vital resource that all businesses and communities depend upon, with diverse challenges depending on how you use water and where you operate. Companies must move beyond a narrow-minded, non-contextual focus on water use and efficiency. It’s time for companies to embrace water stewardship and implement a strategic approach to water risk mitigation across the enterprise – and it’s time for investors to start asking for it.

Article by Dylan Waldhuetter, Director of Water Stewardship Solutions at The Water Council, where he is responsible for program development and support related to the council’s water stewardship initiative.