By Alix-Ines Lebec – WaterEquity, By Shivani Garg Patel – Skoll Foundation
Climate change threatens the global water supply, particularly within lesser developed countries and emerging markets that have seen decades-long shortages in the investment of clean water infrastructure. With the onset of COVID-19, 2.7 billion people lacking clean water and sanitation face an even more immediate threat as the most effective measures to fight the outbreak, such as frequent hand washing, are simply not available.
COVID-19 continues to compound this crisis. Private investments that have previously served these emerging consumers have stalled. Uncertainty in supply chain integrity and weakened consumer demand have increased perceived market risks. While the largest funds that can outlast this temporary disruption may thrive long term, those that provide capital to micro, small, and midsize enterprises are now in search of reliable, clear-cut assets in which to deploy their capital. Fortunately, we have recognized an impact investment fund that is designed to close this gap.
This is an immediate opportunity for asset owners—principally family offices and mission driven foundations—to invest directly in scalable solutions to one of the world’s most immediate problems.
The case for investing in water and climate solutions
The Skoll Foundation has committed a catalytic investment in WaterEquity, the first asset manager exclusively focused on solving the global water and climate crisis. WaterEquity’s funds invest in financial institutions and enterprises delivering access to safe water and sanitation to millions of low-income consumers and their families. This represents a tremendous market opportunity—to invest in an under-capitalized segment of the market, one that offers competitive returns and undiluted social impact.
We cannot wait for the dust to settle, or the pandemic to end, to act. Doing so needlessly puts millions of people at risk. Foundations and family offices are among those now in a position to follow the lead of Skoll and WaterEquity to invest directly in projects that can reduce illness and death, and also reduce poverty in the most vulnerable communities.
These types of funds are the cutting edge in the race towards achieving the Sustainable Development Goals (SDGs) set forth by the United Nations to “promote prosperity while protecting the planet.” We are enacting the exact type of financial stewardship necessary to help communities combat health and economic crises. There is an urgent need for asset owners to step up and provide the equity necessary to unlock large pools of institutional capital to mobilize water and sanitation solutions at scale.
A market opportunity
An estimated 600 million people in emerging markets could be served if microloans were made available today – this represents an $18 Billion market opportunity. Economists estimate that solving the global water and sanitation crisis by 2030 carries a $1 trillion price tag.
That is why we at the Skoll Foundation, in partnership with our investment manager, Capricorn Investment Group, have committed to a $10 million equity investment into WaterEquity’s impact investment funds. This catalytic investment unlocks an additional $100 million in institutional capital funding for water and sanitation microfinance loans across emerging markets made by the U.S. International Development Finance Corporation (DFC). It is a solution that immediately and effectively benefits those communities facing dire water and sanitation shortages while providing investors an attractive return on investment capital. This aligns directly with the Skoll Foundation and Capricorn’s mission-driven investment thesis within its endowment portfolio: to build a comprehensive portfolio of scalable solutions to the world’s greatest challenges which can also generate competitive risk-adjusted returns and enable a virtuous cycle of capital redeployment over the long-term.
Proven track record of impact
Founded by award-winning entrepreneur Gary White and Matt Damon of Water.org, the success of WaterEquity is built on decades of experience investing in water and sanitation in emerging markets, delivering proven social and financial returns. Led by Dr. Paul O’Connell who brings 20 years of institutional asset management experience, WaterEquity’s funds, since 2016, have already made 30 investments in record time across a portfolio of high-performing financial institutions and enterprises in India, Indonesia, and Cambodia. Demonstrating four years of sustained, strong financial performance, WaterEquity’s investments have already impacted 1.6 million people.
With so much uncertainty in the financial markets, this investment is a win-win for both investors otherwise on the sidelines, and for communities on the ground facing dire fundamental threats. That’s why we’re looking for others to match our $10 million investment. The only question then is, who will join us in reaching our goals?