World Water Day: Why Now is the Right Time to Invest in Water Innovation
By Will Sarni
Water is one of the world's most precious and valuable resources. None of us can live without it.
The American West is now among the world’s most water-stressed regions and is facing impacts to business growth, economic development, social wellbeing and ecosystem health. Running through much of the region is the Colorado River, which supports an estimated $1.4 trillion in annual economic activity and 16 million jobs spanning seven states.
The New York Times feature, Wall Street Eyes Billions in the Colorado’s Water, says it well: "In the West, few issues carry the political charge of water. Access to it can make or break both cities and rural communities. It can decide the fate of every part of the economy, from almond orchards to ski resorts to semiconductor factories. And with the worst drought in 1,500 years parching the region, water anxiety is at an all-time high."
And according to reports from earlier this year, a drought contingency plan has been triggered for the Colorado River for the first time due to what's being called, "an increasingly bleak forecast."
There's too much at stake to sit back and wait for someone else to come up with a solution.
The need for innovative approaches to address water scarcity, poor quality and lack of access to safe drinking water was magnified in the 2017 report titled, Liquid Assets: Investing for Impact in the Colorado River Basin, and more recently in the 2019 report, Digital Technology Opportunities for the Colorado River Basin. In particular, the case was made for private capital to invest in innovative technologies such as smart agriculture, remote sensing and artificial intelligence.
We need 21st-century technologies, innovative funding and financial market tools to solve the water challenges of the Colorado River Basin and beyond.
Enter the Colorado River Basin Fund, launching today, World Water Day 2021, to further advance innovative approaches to water challenges and engage a range of stakeholders, all who have an important role to play in solving them. The Colorado River Basin Fund will aim to meet these challenges and opportunities by identifying, investing in and scaling early-stage water sector technology innovations in categories such as satellite data acquisition and analytics, IoT and edge computing, artificial intelligence and water smart agriculture, homes and cities. We view the Colorado River Basin as a strategic testbed of sorts to determine the feasibility of emerging technological solutions for subsequent application in the global water sector providing an opportunity for scale.
Water innovation, corporate focus and finance collide
We are now seeing a more defined intersection of innovative thinking and financial tools. The recently launched Nasdaq Veles California Water Index (ticker symbol: NQH2O) is a significant advancement in bringing financial market thinking and tools to improve the management and transparency in the water sector. As the CME Group overview explains, the Index tracks the price of water rights leases and sales transactions across the five largest and most actively traded regions in California.
The positive collision between innovation and finance also lends itself well to the rise in environmental, social, and governance (ESG) as a focus for corporations. This has been well underway for some time, but the pandemic has accelerated this trend due to an increased focus on the role of the business in solving “wicked problems.” Further, many companies have realized enhanced financial performance because of their substantive and credible ESG reporting.
For example, a recent report by Blackrock, Sustainability - Resilience amid Uncertainty, examined how ESG-focused investment funds performed versus their peers. According to Blackrock, “In the first quarter of 2020, we have observed better risk-adjusted performance across sustainable products globally, with 94 percent of a globally-representative selection of widely-analyzed sustainable indices outperforming their parent benchmarks.” The study noted that as the Dow Jones Industrial Average shed some 34 percent during Q1 as the Covid-19 pandemic spread, Morningstar reported that 51 out of 57 of its sustainable indices outperformed its broad market counterparts. At the same time, MSCI reported 15 of 17 of its sustainable indices outperformed broad market counterparts.
The launch of the Colorado River Basin Fund aligns with the acceleration of interest and commitments by investors and corporations to address ESG issues. This interest is now translating to actual investments in technologies and businesses that solve very specific environmental and social challenges. As water is a pressing environmental, social and economic issue that touches virtually every part of the globe, the Colorado River Basin Fund will seek to provide a tangible opportunity to activate investor and corporate ESG strategies.
Will Sarni is the founder and CEO of Water Foundry and a founder of the Colorado River Basin Fund.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.