Opening the flow of social impact investment
by Alix-Ines Lebec, Executive Vice President of Business Development & Investor Relations, WaterEquity, Inc.
This story was originally published on LinkedIn.
In 2017, it’s astonishing that 1 in 10 people — nearly 850 million worldwide — don’t have access to safe water. Some 2.3 billion are living without access to improved sanitation. To put that in perspective, more people have a mobile phone than a toilet.
That’s a crisis, but one that we have the resources to solve in our lifetime. We can’t do it with philanthropy alone. It would cost $200 billion a year over five years, and the current annual level of aid is just $8 billion.
I had the opportunity to join a conversation on new funding and business models for social impact at the Global Meeting for the Women’s Forum for the Economy & Society. Whether it was new financial vehicles or impact-focused funds — one thing was clear — there is a growing demand for investments that contribute to solving difficult global problems while generating sustainable returns.
What does this mean for our efforts at Water.org? It means we can build on the success of our blended finance model — WaterCredit — that has enabled at least 70 microfinance institutions to provide small, affordable loans to families living in poverty to construct a water connection or toilet in their home. Attracting nearly half a billion dollars in local commercial investment capital for these portfolios, our microfinance partners have disbursed 2 million WaterCredit loans to families in need — a critical step towards addressing a $12 billion market demand at the base of economic pyramid.
To help scale this, we launched WaterEquity — a social impact investment manager that is creating and managing funds investing in the microfinance institutions providing WaterCredit loans, as well as local businesses providing access to safe water and sanitation. Demonstrating that there is a pool of reliable and profitable deals in this space allows us to attract global capital and amplifies our impact.
The proof is in the reaction from the market. WaterEquity’s current $50 million Fund received a commitment for $20 million from the Overseas Private Investment Corporation, a U.S. government agency that helps American businesses invest in emerging markets, along with a $5 million zero-interest loan from Bank of America. Over seven years, the Fund is projected to reach at least 4.6 million people in South and Southeast Asia with access to safe water or sanitation, at a nearly zero philanthropic cost.
The appeal of social impact investment may seem more mainstream now, but the industry has worked hard to get here with key leaders at the helm including: Root Capital, Acumen, and Omidyar Network. After proving the viability of Water.org’s WaterCredit model and its first investment Fund, WaterEquity has also joined the movement.
There is a unique and timely opportunity here for people and global businesses to end a crisis that still robs entire communities of a future. Girls and women, who are disproportionately affected, spend over 125 million hours a day scavenging for water.
People, businesses, and financial institutions have the opportunity to invest in a manner that aligns with their interests and generates sustainable returns, while also ensuring millions of people get access to safe water and sanitation. I’m proud that we’ve helped change the perception that the global water crisis can only be addressed through traditional charity alone. It’s encouraging to see a new generation of forward thinking philanthropists, socially-minded investors, and millennials embracing social impact investment and entrepreneurship to reverse the tides of global inequality.
If their enthusiasm is any indication, we’re likely to see social impact investing unlock the levels of capital, leadership, and collaboration needed to match the scale of global challenges such as the water crisis and ensure we are the generation that will solve this in our lifetime.