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March 27, 2024

SWIS 2024 Charts Course for Water Security

Earlier this month, the Sustainable Water Investment Summit (SWIS) facilitated two days of dialogue on the role of private capital markets in tackling pressing water resource challenges in the United States. Initiated in 2023 by WestWater Research, LLC (WestWater) and Brownstein Hyatt Farber Shreck (Brownstein), this conference emerged as a unique and significant event uniting the water and investment communities. Renowned as thought leaders in both spheres, WestWater and Brownstein leveraged their extensive experience in water challenges and active engagement with the investment sector.

Addressing Water Security Challenges: The overarching theme of SWIS 2024 centered on water security, a topic garnering attention from investors and reshaping corporate priorities. Tackling the water security challenges in the United States necessitates private capital investment across three main areas:

Reallocation of Existing Supplies: Implementing innovative approaches to reallocating current water supplies through market transfers is imperative. Examples include:

  1. Leasing Municipal Surplus: Municipal water conservation efforts often result in surplus water portfolios, which can be leveraged through partnerships with various sectors to mitigate supply insecurity.
  2. Industrial Transitions: Shifts in industries, such as energy generation, create opportunities for marketable water supplies.
  3. Groundwater Storage: Expanding groundwater banking and Aquifer-Storage and Recovery (ASR) offers a promising solution for all sectors, particularly agriculture, amidst depleted aquifers and regulatory obstacles.
  4. Partnerships and Exchange Agreements: Flexibility among water users through partnerships and exchange agreements can alleviate water insecurity, necessitating active involvement from the agricultural sector.

 

Development of New Sources of Supply: Technological advancements drive the exploration of new water sources, including:

  1. Local Groundwater Remediation: Remediating contaminated or low-quality groundwater provides a viable local supply option.
  2. Water Reuse: Federal, state, and local investments in both direct and indirect reuse projects are growing areas of interest.
  3. Ocean Desalination: Advancements in desalination technologies aim to harness ocean water as a cost-effective supply source for coastal communities.
  4. Natural Capital: Heightened awareness of environmental concerns prompts significant investment in forest and soil health to augment water supply sustainability.

 

Infrastructure for Access and Connectivity: Investing in infrastructure remains vital for accessing and utilizing water resources effectively. Key infrastructure needs include:

  1. Distributed Storage: Deploying small-scale surface storage reservoirs and groundwater banking facilities to manage water supply volatility.
  2. Access to New Sources: Balancing the challenge of diminishing local water sources with the need for reasonable access to new supply sources.
  3. Power Supply: Managing the considerable expenses associated with powering new water supply initiatives.

 

Private Capital Investment and Its Increasing Relevance: The strategies outlined demand significant capital, highlighting the growing role of private capital markets. Despite substantial government investment and the continued reliance on municipal bonds, private capital is essential for innovation and expedient resolution of complex challenges. The risk-adjusted returns offered by private capital attract investors, necessitating its inclusion in comprehensive water management efforts across all sectors.

 

Challenges Facing Private Capital Investment in Water: Overcoming barriers to private capital investment requires concerted efforts to address complex issues and public scrutiny. Key challenges include:

  1. Increased Scrutiny on Water Security: Growing public interest in water management decisions necessitates strategies to address concerns and garner support for private investments.
  2. Rising Costs: Escalating expenses associated with water projects demand active management of supply portfolios and a focus on high-value investments.
  3. New and Unstructured Investment Landscape: The unique nature of water investments requires tailored approaches to mitigate risks and establish a structured investment landscape conducive to sustained returns.
  4. Potential solutions discussed at SWIS include direct engagement with the public to build support for water projects, enhanced education on water security risks, and a focus on high-value investments aligned with long-term goals. By acknowledging and addressing these challenges, private capital markets can play a pivotal role in driving sustainable water management solutions.

Looking ahead, the momentum generated by SWIS underscores the urgent need for innovative solutions and collaborative action across an even wider network to address water challenges. As we reflect on the insightful discussions and actionable strategies outlined at SWIS 2024, we anticipate even greater strides in the coming year. We are excited to announce that SWIS will continue next year, offering another invaluable opportunity for stakeholders to convene, share expertise, and drive forward the agenda for sustainable water management. Join us as we continue this important journey towards a more resilient and water-secure future. Sign up for our email newsletter for announcements on next year’s summit! https://waterexchange.com/subscribe/