Leveraging a Water Efficient Economy: opportunities for companies and financial institutions.

Date: 10/13/2016

Water has always been a valuable resource but taken for granted for many years, especially in Brazil, given its abundancy. The recent water crisis that affected the Southeast region of Brazil, in addition to factors such as changes in rainfall patterns – aftermath of environmental and climate impacts accumulated over exploitation of natural resources for decades by society – indicate that the difficulties in the water supply are a reality that will require additional efforts and major changes in the paradigms to be addressed.

Luckily, several financial institutions started to realize that environmental damages could have a significant impact in business, understanding, for instance, that a water crisis can affect companies’ loans payments, which would bring economic risks to investors.

This growing concern of the financial sector with the risks involved with the Natural Capital motivated the Brazilian Business Council for Sustainable Development (CEBDS) in partnership with GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit), a German federal agency, to develop a study to comprehend these risks.

The study Leveraging a Water Efficient Economy: opportunities for companies and financial institutions, aims to point out opportunities for both companies and banks to actively participate in the transition to a water efficient economy.

It was analyzed 14 viable technologies to 10 relevant sectors to the Brazilian GDP and high level water consumption – Cattle, Agriculture (Soybean and Sugar-Cane), Food Processing, Automotive, Petrochemicals, Steel & Metallurgy, Mining, Beverages and Pulp & Paper.

The technologies included are: Hydrometer for Consumption Segmentation, Drip Irrigation, Dust disperser, Sewage for aquaculture, Evaporation to vinasse concentration, Water loss detector, Chemical free cooling tower, Rainwater reuse, Ozone treatment, Wetlands, Ultra filtration, Reverse osmosis, Thermal distillation, Reforestation (See below on table 2).

According to the study, the potential water saving annually for the 14 technologies can reach 19% of the water consumed by industry and 3% of the water consumed by agriculture – these percentages may represent up to R$ 11.6 billion saved per year. In absolute numbers, this represents 4.4 billion cubic meters saved per year – 2.3 billion for industrial technologies and 2.1 billion for technologies related to agriculture. The market potential (investment gap) of these technologies is $ 52 billion, of which R$ 27 billion could be funded by financial institutions (Table 1 presents information about investment gap and CAPEX for each technology).

In other words, if these technologies are effectively implemented, benefits could be generated for financial institutions and for companies, especially to reduce the consumption of water and use it more efficiently, resulting not only in a reduction of the water consumed, but also in financial savings. In addition, when using this resource more efficiently in the case of a crisis or reduction of water supply, the company becomes less vulnerable, reducing the dependency, including in relation to public administration tanks and watercourses even avoiding conflicts of use with society.

To increase participation and evaluation of investments, it is essential for the financial sector to know which of the practical solutions that are being developed and/or implemented by the market are more effective, both economically and in efficiency. Based on this understanding, these institutions can make a survey on the feasibility of these technologies in terms of risks and benefits to the investor.