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Is the world running out of water? Opening the investment tapfor capital marketsEIB, Luxembourg18 October 2018
Our Anthropocene
Global population CO2 Reduction tropical forest
Fertilizer usage Freshwater use Species decline
Our Anthropocene
FORESTS SPECIESOCEANS CLIMATEWATER FOOD
MARKETS
FINANCE
POLICY
World Wide Fund for Nature (WWF)
Worlds largest conservation organization
Active in 120 countries
>5 million supporters globally
Science Based, convening, solution oriented
WWF - World Wide Fund for Nature
80% freshwater species populations lost since 197050% global wetlands destroyed in 20th century
Terrestrial Species
36%
Marine Species
58% 81%
Freshwater Species
Increase of global water consumption by 55% until 20501.8 billion people affected by water scarcity in 2025
Top 5 Global Risks in Terms of Impact
Water is one of the biggest risks for the global economy
Fiscal Crisis Water crisis Weapons of mass desctruction
Failure of climate change mitigation and adaptation
Weapons of mass desctruction
Climate Change
Unemployment
Water crisis
Information infrastructure break down
Rapid spread of infectious diseases
Interstate conflict with regional consequences
Weapons of mass desctruction
Failure of climate change mitigation and adaptation
Weapons of mass desctruction
Large-scale involuntary migration
Water crisis
Severe energy price shock
Extreme weather events
Natural disasters
Water crisis
Failure of climate change mitigation and adaptation
Extreme weather events
Failure of climate change mitigation and adaptation
Natural disasters
Water crises
2014 2015 2016 20182017
Top risk for the global economy
Merrill Lynch‘Water scarcity a bigger problem than assumed’
Credit Suisse‘Water: The Paramount Megatrend of our Time’
HSBC‘GDP will be 'severely hampered' by water scarcity’
Morgan Stanley‘Water: The Perfect Storm’
Standard Chartered‘Water – The Real Liquidity Crisis’
Citi‘Water Worries: Climatic Consequences’
That‘s already being said by FI‘s…That’s already being said by Financial Institutions…That’s already being said by FI’s…
Physical Water Risk - QUANTITY
2016, Drought, Brazil>50% drop of net income of Sabseb
2015, Drought California 2,7bn US$ losses and 21.000 Jobs
Physical Water Risk - QUALITY
2015, Leather, IndiaClosure of 98 tannaries – Chrome VI salts
2015/16, Fracking, globalBans in France, Scotland, NY State
Regulatory Water Risks
2018, Mining, South AfricaAMD regulation - higher operating cost
2013, Mining, PeruNewmont Mining loses SLO – community protests over access to water
Repuational Water Risk
2015, Beverages, India„Killer Coke“ – ban in various states –groundwater conflicts
2013, Textile, AsiaGreenpeace campaign on toxic laundry
Water RiskTools
Water Risk Filter (WWF)
Aqueduct Water Risk Atlas (WRI)
Water Risk Valuation Tool (Bloomberg)
Global Water Tool (wbcsd)
Water Risk Monetizer (Ecolab & Trucost)
ReportingInitiatives
CDP Water Disclosure (CDP)
Dow Jones Sustainability Index (Robecosam)
Ceres Aqua Gauge (Ceres)
How can I measure water risk?
FreshwaterRisk and Opportunityfor capital markets
EIB, LuxembourgOctober 2018
Philipp WagnitzWWF [email protected]
Major Global Investor Pools
Global ODA < $0,2T
Sovereign Wealth Funds
$42TGlobal Public Debt
$76TGlobal Equity Market
$91TPrivate Sector Debt
$4.2TPrivate Capital
< $1TUS Foundation Philanthropy $6,6T
Financiers
We want to invest in sustainable projects, but we have difficulties identifying sufficient bankable projects
A Bankable Project is any project that:
1. In many cases uses blended finance
2. Has a positive environmental impact
3. Generates a positive return for certain stakeholders.
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
GRANT BASED PROJECTS• WWF• Grants• Donors• Corporates• Development Banks
Leveraging Capital
1x
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
SEED FUNDING• WWF• Grants• Donors• Corporates• Development Banks
Leveraging Capital
1x
TO FUND:• Pilot projects• Feasibility studies
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
SEED FUNDING• WWF• Grants• Donors• Corporates• Development Banks
INVESTMENT• Banks• Development Banks• Investors• HNWIs
Leveraging Capital
1x
~20x
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
SEED FUNDING• WWF• Grants• Donors• Corporates• Development Banks
INVESTMENT• Banks• Development Banks• Investors• HNWIs
REPLICATE AND SCALE• Retail Investors• Institutional Banks• HNWIs
Leveraging Capital
1x
~20x
~50-100x
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
SEED FUNDING• WWF• Grants• Donors• Corporates• Development Banks
INVESTMENT• Banks• Development Banks• Investors• HNWIs
REPLICATE AND SCALE• Retail Investors• Institutional Banks• HNWIs
1x
~20x
~50-100x
Leveraging Capital
DRIVEIMPLEMENTATION
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
SEED FUNDING• WWF• Grants• Donors• Corporates• Development Banks
INVESTMENT• Banks• Development Banks• Investors• HNWIs
REPLICATE AND SCALE• Retail Investors• Institutional Banks• HNWIs
Leveraging Capital
DRIVEIMPLEMENTATION1x
~20x
~50-100xIMPACT
1x
~20x
~50-100x
Fund
s
Year 1
Year 0
Year 3
Year 2
Year 5
Year 4
SEED FUNDING• WWF• Grants• Donors• Corporates• Development Banks
INVESTMENT• Banks• Development Banks• Investors• HNWIs
REPLICATE AND SCALE• Retail Investors• Institutional Banks• HNWIs
Leveraging Capital
DRIVEIMPLEMENTATION
WWF INVOLVEME
IMPACT
Local populations
Lusaka (Capital)Population
2.5m
KafuePopulation
200kMazabuka
Population
200kNamwalaPopulation
80k
Itezhi-tezhiPopulation
45k
Constellation of different projects
Restore National parkRestore area to allow for more biodiversity and expand tourism facilities to generate revenues
$5m
Irrigation improvementImprove irrigation system and regulate water allocation and farm expansion
$10m
Water treatment systemReduce water pollution and treat water from cities
$50m
Fish processing plantReduce harvesting of juvenile bream to maintain sustainable fish population.Provide local fisheries with the opportunity to increase their price point
$2mManage Cattle
FarmingReduce pressure of cattle farming and
use smart grazing management to allow vegetation of Flats to grow
$12m
Bankable
Grants/Subsidies
HARINGVLIET
LAND PURCHASE€2.5m• Area: 27 hectare• Price: ±€100.000/hectare• Land was agricultural land
FUN
DS
HARINGVLIET
NATURE DEVELOPMENT €0.3m• Including area adaptation
costs and visitor facilities (walking path, information, fences, etc.)
FUN
DS
HARINGVLIET
LAND PREPARATION €1.7m• Including costs for
research, permits, preparatory works, height increase, connecting infrastructure
• Some other costs to be covered by local water authority
FUN
DS
HARINGVLIET
SALE OF LOTS€5m• Number: 26 houses• Note: this figure strongly
depends on market conditions and the type of houses built
FUN
DS
HARINGVLIET
SALE OF HOUSES€1m to €1.6m• Houses could be
developed and sold• Currently three private
parties preparing a bid to develop area
• Developers can choose to develop 25-40 houses or 'build-ready' lots
FUN
DS
HARINGVLIET
Profit Potential€0.4m to €2m• With a €5m investment
this deal can make up to €2m profit
FUN
DS
Illustrative
SCALE AND REPLICATE
Seems possible to replicate approach in over 20 riverside locations*• Current farming lands• Potential to be part of river protection system• Close to urban center
Total ticket size of at least €100M viable• To be funded in one vehicle or per project• To be determined which party takes on development role
Supportive government funding could be available• As part of the 'high water protection program'• National plan currently being developed
* Rough estimate of most suitable locations; vastly more locations available which would require relocation of existing inhabitants, possibly as part of 'high water protection program' of the Dutch government Source: Bureau Stroming
SMEs
BWS Process
DISCOVER STRUCTURE DEVELOP FUND
Create Bankable Project Ideas
One Page Document
Assess viability and create high level business case
Investor Proposal
Finalise solution design
Business Plan
Secure blended finance and investor support
Contracts signed
Actions
Documents
Support
ADDED TO INCUBATOR
DRAGONSDEN
Enabling Team
External Consultants
Snapshot of the Pipeline
Büyük MenderesTurkey$5-12M
KanpurIndia
$2-20M
Kafue FlatsZambia$100M
BistretRomania
$70 -133M
Great BarrierReefAustralia$140M
LahorePakistan$10MHaringvliet
Netherlands$100M
Taihu BasinChina$23M
YangonMyanmar$10M+
Great Sea ReefFiji$10M+
PantanalBrazil
$2-20M
© Victor Daggberg
IN-HOUSE WATER RISK AND KNOWLEDGE EXPERTS
OFFICES IN OVER 100 COUNTRIES FIRST-HAND KNOWLEDGE
OF KEY LANDSCAPES
PARTNERSHIPS WITH GLOBAL BRANDS
EXISTING RELATIONSHIPS WITH REGULATORS AND GOVERNMENTS
COMMITMENT TO BANKABLE PROJECTS
PROVEN SCIENCE AND CONSERVATION TRACK RECORD