Clean Water and Sanitation are Basic Needs and a Human Right
Water is known to be ‘the elixir of life.’ However, access to clean water and sanitation is neither guaranteed nor readily available universally. As our radicant and evangelist Kirstin points out, more than 40% of the world’s population is affected by water scarcity and approximately 2.3 billion people today still do not have access to safe sanitation (read further on this topic in our blog on water). Most affected by this issue are developing countries. But clean water is also under pressure in developed countries. The consequences of climate change, growing population, increasing water pollution, and declining ecosystems threaten water resources around the world. In recognition of this urgency, ensuring the availability and sustainable management of clean water and sanitation (SDG 6) is one of the 17 UN Sustainable Development Goals.
Responsibility and Change
It is our responsibility to act more sustainably. However, when it comes to clean water, even though it is important, more is needed than tweaking our individual consumption habits. We need to transform the global economy towards a sustainable economy that conserves natural resources and allows regeneration. This is what we at radicant want to contribute to together with you. Let’s discuss how we can advance efforts to achieve a socially and environmentally just global economy and ensure SDG 6 “Access to Clean Water and Sanitation” becomes a reality to all. One way to do this is through our investments. But how exactly?
Investing in water-positive solutions
Our investment decisions allow us to support companies and projects that positively contribute to clean water and sanitation. If we look at water supply and treatment worldwide, there are various private companies that are innovative in these areas and are also listed on the capital markets. On the one hand, there are the traditional water utility companies, which, for example, supply cities with clean and treated water and also manage sewage. On the other hand, we find various chemical and industrial companies, which provide a wide variety of products, services and innovations for water treatment and supply i.e., water pipes or chemicals for cleaning the water. The treatment of wastewater from industrial, energy and mining companies is also a relevant service. Including Stocks and bonds of such companies in one’s portfolio is one way to support the targets of SDG 6.
Green Bonds with Water as an Alternative
However, in many countries, water and sanitation are purely governmental matters and are considered a public service. Here, government bonds issued by these countries could be worth considering; however, it is important to keep in mind that it is not defined for what the countries can use the money. Therefore, it is important to think about further considerations, like the level of corruption in the given country. Labeled bonds, like Green Bonds, Social Bonds, and Sustainability Bonds, can present an interesting alternative. Based on internationally recognized standards, the issuer (states or sub-state entities such as cities) commits to use the funds for a predefined green and/or social project only and to report on it. Indeed, the investment-intensive water and sanitation sector is well suited for such (sub-)state green and social bonds.
Private Companies in Emerging Markets with Highest Impact
Finally, investments in companies that are not listed on the stock exchange (also called private equity) are particularly relevant – especially in developing countries, where one of the biggest investment gaps in clean water and sanitation prevails. Unfortunately, such investments are hard to access to retail investors due to the lack of liquidity, very long investment horizon and disproportionately high level of risk. Only a few investment funds make these strong impact markets accessible to retail investors and often only under various restrictions. However, we at radicant are working on finding a solution to offer such products in the future.
Investing in the good while leaving the bad
Besides investing in companies or projects that have a direct positive contribution to clean water, one should of course avoid investing in polluting companies. On the one hand, this can be ensured via various exclusion criteria (e.g., companies with revenues from fossil fuels), on the other hand, one should take a close look at companies with higher water consumption and pollution potential. For example, the water footprint of a company that mines rare earth minerals (which are needed for the transition to clean energy such as i.e., in solar panels) can vary greatly depending on management and region.
All in all, there are various exciting opportunities to invest in effective and water-positive companies and projects and to avoid harmful investments. Let’s work together to promote the part of the economy that makes a positive contribution to one of the greatest future challenges facing humanity: Access to clean water.