Shrewd investment can address climate change and drive greener development, says Rebecca Schlagenhauf, Principal at Baird Capital.
The water industry is experiencing significant transformation driven by climate change and the urgent need for sustainable solutions.
Water and climate change are inextricably linked. Extreme weather events are making water more scarce, unpredictable, and polluted, or all three. All these factors in turn tax ageing and under-invested water infrastructure.
The impact throughout the water cycle threatens sustainable development, biodiversity, and people’s access to water and sanitation.
Only 0.5% of water on Earth is useable, available freshwater – and climate change is dangerously affecting that supply. Over the past 20 years, terrestrial water storage – including soil moisture, snow and ice – has dropped at a rate of 1 cm per year, with major ramifications for water security.
According to UNICEF, four billion people, almost two-thirds of the world’s population, experience severe water scarcity at least one month each year, and by 2025, half of the world’s population could be living in areas facing water scarcity.
It’s vital that we don’t overlook the water industry as a crucial place to start diverting our capital and turn the dial toward a better future.
Growing impact
Along with water shortages and scarcity, labour costs, ageing infrastructure and migration have led to a huge growing focus and increased capital flowing into water infrastructure and technology.
One of the most significant recent developments is the $1.2 trillion Infrastructure Investment and Jobs Act, passed by Congress in November 2021, which includes up to $63 billion for Water Infrastructure appropriations. This substantial funding recognises the critical need to refresh and technologically advance ageing water infrastructure, some of which is 40-50 years old.
This investment represents a renewed focus on water issues not seen since the passage of the Clean Water Act in 1972 and is only beginning to be allocated.
The same is seen in the UK, with the government laying out a new plan for plentiful water. This will make sure water companies accelerate their infrastructure upgrades – bringing forward £1.6 billion for work to start between now and 2025. Farmers will also be supported with an extra £34 million to tackle water pollution and boost food production, and an additional £10 million for farm reservoirs and irrigation.
Private investment needed
As governments and private investors increasingly recognise the importance of water, the collaboration between private equity and water companies is emerging as a powerful force.
With their industry expertise, financial resources, and shared commitment to addressing current and future challenges, private equity firms are poised to play a pivotal role in shaping the future of water.
While new technologies and innovation are driving the industry towards a brighter future, this progress is contingent on continued investment. Private equity firms, recognising the potential for growth and impact, are increasingly focusing their attention on this sector.
Areas such as biosolids processing, desalination, tank mixing and aeration, onsite hypochlorite generation, residual management, and THM reduction are all particularly promising, offering a wealth of potential benefits for investors.
Water storage tank mixing is crucial for maintaining water quality. It prevents stratification, reduces stagnation, ensures uniform chemical distribution, limits sediment accumulation, and improves dissolved oxygen levels. Emerging technologies like smart mixing systems and ultrasonic mixers are advancing the field, offering more efficient and adaptive solutions.
THM aeration is a water treatment process that reduces trihalomethanes, potentially harmful byproducts of chlorine disinfection. This method has gained popularity due to stricter regulations, increased health awareness, and technological advancements. It offers a cost-effective, flexible solution for improving drinking water quality.
The water industry is ripe for investment due to climate change and the issues that plague the industry. If we continue to invest in technologies to help mitigate the problems that face us, better infrastructure will be achieved, and water will become a key to unlocking sustainability.
Case Study: Clearwater1
Baird Capital invested in cleanwater1 in 2022, leading it from strength to strength. It’s a leading provider of water quality solutions, offering end-to-end water and wastewater treatment products. Formerly known as UGSI, the company specialises in disinfection, residual management, THM reduction, and tank mixing.
With over 30,000 installations and 150 employees, the company serves utilities and industrial customers, focusing on innovative technologies to meet evolving water quality goals and regulations.
cleanwater1’s growth strategy includes both organic expansion and acquisitions, assembling a family of leading, branded, proven solutions for the water and wastewater industries.
For example, the acquisition of VeloDyne, led by Paul Plache, further strengthened cleanwater1’s position in the market. Further, through its partnership with Trios Measurement and Data Technology GmbH in Germany, cleanwater1 is bringing leading in-line sensor technology to power a set of “measure and treat” customer solutions.
Looking ahead, cleanwater1is focusing on product development, such as next-generation polymer blending systems and an expanded Microclor® onsite hypochlorite generation system. They are also targeting new markets, including the industrial sector, which presents significant untapped opportunities.
Baird Capital Partners Europe Limited is authorised and regulated by the Financial Conduct Authority.
