To mark the global World Water Day, in this special feature below KBI Global Investors takes a look at what it calls the "transformative impact" of smart water investing and how it addresses the complex water challenges of today and into the future.
Water is essential in feeding a rapidly expanding global population, with nearly 70% of the water supply accounted for by agriculture. Highlighting its importance in delivering economic growth, industrial use accounts for little more than 20%, with domestic water use a little under 10% of all supply1.
On World Water Day – first designated by the United Nations General Assembly on 22nd March 1993 – that should not be allowed to obscure the vital need to improve domestic water supply. c800 million people have no access to clean drinking water, with 2.5 billion people lacking access to basic sanitation, meaning that we are well behind schedule if we are to deliver on the UN’s objective of water and sanitation for all i.e. Sustainable Development Goal (‘SDG’) 6 by 2030².
Growing demand for fresh water, coupled with unrelenting demand from industry and agriculture, has focused the world’s attention on the way in which we manage our scarce water resources, with limited supply, increasing demand and regulation posing various challenges. KBI Global Investors (‘KBIGI’), which is a specialist in the field of Natural Resources equity investing – investing in companies providing solutions to these challenges for almost a quarter of a century – sees ‘Smart Water’ companies playing a key role in addressing these challenges.
What’s powering the accelerated adoption of Smart Water technologies?
Smart Water technologies, when coupled with data analytics and artificial intelligence, play a pivotal role in predicting weather events and managing system capacity to cope with sporadic water supply and treatment needs. These advancements enable more effective detection of breaks and leakages in water infrastructure, which is increasingly prone to degradation and frequent failures. The fast-moving adoption of technological solutions to address water-related challenges has become a dominant force.
- The pandemic underscored the critical need for advanced technological solutions in water management. Companies that had previously invested in digital solutions, including data analytics, remote monitoring, sensors, and smart meters, gained a substantial advantage in navigating the complexities of the global crisis. This advantage has, in turn, fuelled a heightened demand for these technologies.
- Public awareness and concerns over combined sewage overflows, especially in the wake of extreme weather events linked to climate change, have escalated. Overflows during heavy rainfall pose both environmental and biodiversity threats, with digital solutions increasingly indispensable in addressing and mitigating these issues.
- Continuing chip shortages and supply chain bottlenecks meanwhile, have created a scenario where the demand for digital solutions outstrips the available supply; companies offering Smart Water technologies find themselves with elevated order books. The integration of communication networks and the Internet of Things by utility providers facilitates the monitoring of water resource information. This, in turn, optimises and enhances water use efficiency. These technologies not only address leak detection but also contribute to improvements in water and energy efficiency, and water quality. Data analytics, acting as a cornerstone, crucially provide a platform for optimised technology utilisation and informed decision making, as institutional knowledge diminishes with an ageing water workforce.
A Smart Water case in point – Buffalo, New York
In a collaboration with global water technology leader Xylem, the city of Buffalo, New York has in recent years implemented a comprehensive water management initiative, leveraging real-time control, modelling, and analytics technology. Its overarching goal was to mitigate the challenges posed by combined sewer overflows (‘CSO’), where a mixture of stormwater and untreated sewage is discharged into water bodies during heavy rainfall – all two billion gallons of it! The centrepiece of its Smart Water solution is a Real-Time Decision Support System (‘RT-DSS’), integrating advanced technologies, to monitor and manage the city's water infrastructure in real-time. It allows for immediate responses to changing conditions, facilitates data-informed decision-making, and automatically redirects excess rainwater to underused parts of its system to prevent overflows.
Maximising the use of Buffalo's existing water infrastructure, the system continuously monitors water quality, flow rates, and weather conditions, whilst advanced analytics help to predict and identify potential issues. This allows authorities to take proactive measures to prevent overflows and maintain water quality standards. By providing real-time insights and early warnings, the Smart Water solution enhances the resilience of Buffalo's water infrastructure – rapid responses to potential issues contributing to the prevention of infrastructure failures and extending the lifespan of the existing water systems.
The initiative has been successful, as Geoff Blake, Head of Business Development & Client Services at KBI Global Investors explains. “In the first 12 months of deployment, Buffalo’s Smart Water solution achieved a remarkable reduction of 450 million gallons, helping to protect local waterways from pollution, preserving biodiversity, and ensuring a far healthier and more sustainable aquatic ecosystem.” The Buffalo Sewer Authority announced only last March that the smart sewer digital system implemented had saved some $145m3.
“The system highlights the transformative impact of Smart Water technologies in addressing the complex water management challenges faced by urban areas”, says Blake, and “underscores the potential of technology-driven solutions to improve the efficiency, sustainability, and resilience of water infrastructure in cities grappling with ageing systems and environmental concerns. The multi-decade tailwinds driving water as an investment theme are more relevant today than ever before.”
KBIGI’s pioneering role investing in Water
KBIGI has been investing in water through its dedicated Water Strategy since 2000, providing access to the companies offering solutions to many of the world’s major water concerns – water recycling, sanitation, and infrastructure included. It represents a valuable investment opportunity set, providing solutions which are helping to build a resilient, sustainable water value chain across the globe.
KBIGI believes in the positive impact it is making in the water space by investing in companies helping to solve the problems that exist around water but has in recent years developed a proprietary measurement technique it refers to as the Revenue Aligned SDG Score (‘RASS’). It measures the percentage of the revenues generated by the constituent portfolio companies in its Water Strategy, aligned with the delivery of the SDGs. In the case of the Water Strategy, some 78.8% of its portfolio revenue is positively aligned to the SDGs, with direct positive impact on eight of the goals as of 31 December 2022, (the end 2023 data to be made available imminently).
¹ http://www.globalagriculture.org/report-topics/water.html
² United Nations, International Decade for Action ‘Water for Life’ http://www.un.org/waterforlifedecade/sanitation.shtml,
WHO and UNICEF, ‘Progress on Drinking Water and Sanitation’ 2012
