Key Takeaways from the Sustainable Water Investment Summit
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Key Takeaways from the Sustainable Water Investment Summit

Brownstein Water Blog, March 15, 2024

Set against the context of unprecedented demand for water supply solutions, Brownstein and WestWater Research brought together water industry and finance leaders for the second annual Sustainable Water Investment Summit. The World Resources Institute’s latest data helps articulate the scale of the demand for water supply reliability, sustainability and innovation: by 2050, an additional billion people will be living in arid areas and regions with high water stress, and by 2050, around 46% of global GDP is expected to come from areas facing high-water risk (up from 10% currently). Given these realities, it’s unsurprising that diverse interests are now converging to meet the challenges of ensuring a resilient and accessible water future. Polls find that 63% of global companies now undertake water-related risk assessments, and 1,100 CEOs have annual performance reviews tied to results around water goals

Here we outline a few of the takeaways and reflections from the conference held last week at the Terranea Resort in Los Angeles.

Sustainability and certainty are inextricably intertwined. Many speakers discussed concerns about regulatory uncertainty and the effect that had on willingness to invest in certain areas, as well as the value of going through difficult processes (e.g., groundwater adjudications) to obtain certainty as to water right quantities and the regulatory framework for the asset. The quantity that can be sustainably utilized provides certainty and, in turn, certainty as to the regulatory regime can also ensure that the resource will be sustainably used.

Communication and education are paramount. Water continues to be undervalued and underappreciated by consumers. At the same time, private investment in land and water resources is under increasing scrutiny. In large part, speakers said they believe this is due to a failure to communicate what private investment truly is, the benefits private investment brings in the space and the potential unintended consequences of limiting that investment. In certain cases of large water supply infrastructure projects, public-private partnerships are critical in large part because risks can be transferred to private investors, safeguarding public interests. Investment and project strategies should incorporate a strong communications and education component. Related to demand management, water reliability, groundwater infrastructure and growth, panelists noted how better communication needs to happen around what the consequences of inaction are and how other industries have been far more successful in explaining their value.

Environmental Social Governance (ESG) considerations are not going away. While we may be presently experiencing a wave of anti-ESG backlash and politicization of climate and natural resources issues, those operating in the water investment space can’t be distracted by the headlines. The term “ESG” may morph yet again into another term or acronym, but regardless, water managers, users and investors will need to consider the climate and environmental impacts, public and human relations risks, and other material aspects of potential projects and investments. This will be driven, if not by requirements in the United States such as the recently adopted SEC Climate-Related for Investors, by regulations in other parts of the world or by the reporting requirements of investors themselves.

Nature-based solutions are not fringe. Panelists discussed nature-based solutions, highlighting how natural infrastructure—from forests to native biologics—can offer impressive water conservation, climate mitigation and carbon capture benefits at a lower cost than gray infrastructure. Examples discussed included innovative work to improve soil health through biologics to enhance crop yield and quality while reducing water and fertilizer demand and novel financing mechanisms to support forest restoration work, creating downstream water quality and water yield benefits as well as climate mitigation through avoided wildfire emissions. Panelists shared that demand for investment in nature-based solutions is strong and that investors want to understand the benefits that actually accrue to people and the environment via reporting obligations imposed on companies engaged in providing nature-based sol

Agriculture, farmland investments and water supply risk issues are still evolving. Speakers and audience members addressed how water supply risk is changing farmland investments and seemed in consensus that, in California, the Sustainable Groundwater Management Act (SGMA) is a necessary evil. As difficult as adjudication was or can be, when the judgment’s entered, it gives players comfort—finally, there’s more certainty. Additionally, Key points specific to water stress and agriculture included:

  • Within basins and districts, not all lands are the same. Value characteristics necessarily include benefits from SGMA projects/management actions, including proximity to replenishment projects, access to groundwater banks, availability of transfer markets, etc., and
  • Issues remain with long-term leases and the difficulty in contracting for wide fluctuations in water price. Smoothing out these fluctuations is needed and will only come from greater certainty about the availability of water.

As previously noted, the need for far stronger communication and education were themes that emerged across several of the panels. Expanding a bit further in closing, a few speakers touched on the importance of not just communication, but really communicating with the spectrum of players in the water industry, and perhaps with those you might assume would be an unlikely sympathetic ear. As one panelist said, “We can’t just be skeptical, we have to have conversations, and we can’t let fear of failure preclude the industry from ambitious innovation that this industry needs.

This document is intended to provide you with general information regarding the Sustainable Water Investment Summit. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

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