Water is Now Unignorable
One of water’s inherent disadvantages is that it’s easy to ignore. For those of us lucky enough to enjoy reliable water and wastewater services, we treat them as if they are as inevitable as breathing. If they work, we don’t care. If they don’t, we care a lot. Very fast.
Being easy to ignore is a fundamental problem for water. It has enabled US water & wastewater infrastructure to literally age out. It has allowed water to be overlooked by investors, attracting less than 1% of just climate venture capital last year, when we’re 75% of the impact of climate change, and at least 10% of the world’s emissions profile (4x the airline industry, which garners orders of magnitude more attention). It means that Thames Water was able to funnel billions of dividends to investors while allowing Londoners’ core infrastructure to crumble beneath their feet. Nothing good comes from a lack of attention. Understanding how to communicate is something that the sector has needed to fix for decades, but has done little to nothing about.
We think that the passage of time has started to fix this problem for us.
We think that water has now become unignorable.
Consider this sequence of media attention that has emerged in the last four weeks:
ProPublica published a study on the world’s overabstraction of groundwater, highlighting the disturbing fact that pumping groundwater up, using it, and then letting it flow as wastewater into the sea is contributing more to sea level rise than all ice melt (ice caps, glaciers, etc.) combined.
The New York Times ran a piece on the friction between data centers and their impact on water supply. In the story, the friction has more to do with the compaction of shallow wells through construction, vs 1:1 competition over that water, but local people end up in the same place - with their water supply threatened.
The Financial Times dedicated a Big Read to the business of desalination. We are going to need a lot of desalination, but hyperscaling to lower unit costs remains an inefficient and high-cost way of doing it, vs desalinating subsea. They are also now publishing an Impact List of all of the climate-related disasters, most of which go unreported. Note that most of these are to do with water (too much, too little, it moving too fast as it falls out of the sky).
The Guardian in the UK looked at the increasing drought conditions in England (England! The land where the Umbrella is the real King), and the threat it poses to the SouthEast in particular, especially London.
Prominent individuals and commentators are also paying attention (and funneling attention) to water:
MrBeast and Mark Rober launched #TEAMWATER, an effort to raise $40m in four weeks in August to provide reliable drinking water for decades to 2 million people. MrBeast and Rober have a combined audience of 500 million people.
Matt Yglesias responded to the NYT with a slightly confusing article where he both claims water is simple to solve while also recognising much of the inherent complexity. No, it won’t be economic to desalinate water to grow food. Just for the record, his “it’s solved because you can use abundant energy to desalinate water” claim is just as tiring as when Musk made it last year.
The investment community is paying attention:
There have been seven (six when I started writing this) $1bn+ transactions in water since the start of the year (we predicted three), and there is much more to come. Both incumbents and private equity are very much open for M&A business.
As a result, investment bankers are seeing remarkable demand for water opportunities across the market. Just ask Brendan Tierney at Raymond James.
Shares in Xylem popped more than 8% after last month’s earnings after it significantly exceeded guidance.
More anecdotal, but New York Climate Week is almost upon us, and we will be hosting, co-hosting, or participating in six water events and counting. Last year there were two (ours and Sciens Capital’s Rethinking Water Event at Columbia - go, it’s great). And there are a zillion Adaptation and Resilience events.
But what if this all just looks like a broad-based shift in attention? What if it’s all as transitory as previously? It’s a possibility, but what’s striking is that the evidence above is not about specific negative events. We have not included anything on the tragic Texas floods, for example. They are all about different aspects of water. They come from disparate sources. What we know to be true, that people are paying attention to water, is confirmed by Trends - the shift in attention is broad-based, and at scale. It far outpaces even the massively viral Coldplay forbidden-office- romance-kiss-cam scandal.
Why is this significant? First, it’s a crucial modern resource. From Chris Hayes’ The Siren Call, to the MAGA movement, attention (any type of attention) is increasingly recognised as a critical resource to help you achieve whatever your ends might be.
For those of us trying to solve problems in water, it would be a significant unlock. As water technology moves up its s-curve, attention yields curiosity on both sides of the entrepreneurial equation. More founders will understand the problems, and see the commercial and impact opportunity. We’re seeing increasingly pedigreed teams as a result. Better founders yield better and faster companies. Investors will be increasingly incentivised to pay attention.
More attention also has implications on the political and mega-capital stage. Attention in the media begets legislative attention. Nothing will be in a hurry, but water is basically the final bipartisan issue in the US, and now that US infrastructure has aged out, renewal is a necessity but also an easy opportunity for incumbents to score points. Attention also has specific implications for the bond market, a source of financing orders of magnitude more important than VC. Watch out for the incomparable Cate Lamb’s work at the Blue Bond Accelerator here.
The increase in attention, and the resulting propensity for legislative and financing willingness is something that utility leaders in particular should harness for the good of their communities. Most utilities see it as a core mission to stay out of the news, local or otherwise. George Hawkins at DC Water (and now at Moonshot Missions) showed us how communication and the guidance of attention is a core skill for the modern utility leader. Time to get after it, and make the fixes as goodwill (and concern) in communities is rising.
Attention is particularly important in water, because of what we who work in it know to be true - that once you see behind the curtain, once you internalise the centrality of water to all human endeavors and natural ecosystems, you can’t unsee it. There’s no going back. It’s sticky to talent, so the more points of entry, the better. Talent recruitment is critical, because retention tends to take care of itself.
Not all types of attention are created equal - there are power laws everywhere. MrBeast and Mark Rober’s campaign is so important because of both the sheer scale, and who they are reaching. Influencers, creators are getting in front of 1 in 16 people on the planet with videos, messages, insight, challenges, games, videos - drawing attention to the reality of global water to an audience we would have zero chance of reaching otherwise. Matt Fitzgerald, the campaign manager for #TEAMWATER recorded a podcast with us last week, and his insight on how to build this kind of public momentum is impressive - it’s a skillset we simply do not have in water.
We could be wrong, of course. The drought-attention cycle (or more broadly the water-attention cycle) is real, and this may just be a scaled version. In the D-A cycle, the drought is a massive problem and garners enormous attention until the temporary fix (rain) comes in, then people move on. But this feels stickier. This isn’t driven by a spike - a California drought, or a Flint Crisis or similar. This is a broad-based increase in attention that is coming from the water issue just becoming unignorably obvious. It’s a relentless march, but it is clearly compounding.
We could be wrong, but we aren’t - and the reason why is in this chart:
It shows the escalation in groundwater change events more than one standard deviation from the mean, using NASA data. A groundwater event (increase - unusual rain event, decrease - unusual drying event, or at the very least increased demands over a single source) is a good proxy for dislocations in the stasis around water that we rely on in water. The stripes in the background show the escalation in global heating. Up to 2019, attention on water was relatively rare, because while we saw dislocations, they were periodic and within the margin of historical norms. Starting in 2019, that started to change, and the trend line has gone to 45 degrees. Climate change is water change. The increased attention is because we’re now seeing the practical reality of what heating means. There are too many stories, so the attention moves to the general, and to being constant.
In working with the Burnt Islanders, BIV is trying to ameliorate what this chart represents. We are trying to minimise the amount of water used, to maximise the amount of reuse and recycling, desalinate water in ways that aren’t stupid, maximise our ability to understand what is in water so we can make sure it’s safe for people and the environment, we’re trying to make sure our utilities are as efficient and reliable as possible. Attention is good for us as a business, in that it is a foundational tailwind for the startups we back, and to the resources and structures that they need. The source of that attention should be cause for reflection from all of us.
