Impact Investing Brain Trust

 Background/Premise: Various private investors have expressed interest in exploring opportunities for private capital to support development of environmentally sustainable water solutions at the community level. Specifically, WaterNow Alliance and others have been asked to help to identify public utility water projects requiring at least a $20 million level of investment that could be a good fit for impact investing. The ideal opportunity for impact investment in the water space is a project that:

• Addresses a specific water supply and/or water quality issue at the local level
• Provides a sufficient financial return for investors
• Provides measurable environmental and other co-benefits

The types of projects that may be appropriate include, but are not necessarily limited to:

• Stormwater recapture projects that reduce flooding, improve water quality or other benefits
• Municipal wastewater treatment that improves groundwater, river health or efficiency
• Constructed wetlands for tertiary treatment

Efforts to identify a pipeline of projects meeting these criteria have met with mixed success because public utilities tend to develop projects/wish lists that are: (1) capable of being financed from primarily known funding sources; and (2) reflect “tried and true” solution sets. In other words, it is unusual for utilities to develop, or have on a shelf, projects that best fit the impact investment profile.

For this reason, we are exploring the option of pulling together an informal “brain trust” of public utility leaders, investor representatives, philanthropists and perhaps others to explore how best to develop appropriate projects from the ground up.

Brain Trust Purpose/Deliverable: The purpose of the Brain Trust would be to:

• Develop a better understanding on the part of potential impact investors about (among other issues):
  • How utilities develop, plan for and finance larger scale water projects, including coordination with adjacent infrastructure and community development projects
  • Financial considerations, procurement requirements & restrictions that inform public utility/municipal planning and project development (both near- and long-term)
  • Identifying motivations and barriers to building support among decision-makers at the municipal level
  • Political and legal context for project planning, development and financing, including authorizing environment and stakeholders involved
• Develop a better understanding on the part of the public utility representatives about (among other issues)
  • The opportunities/risks presented by potential impact investment for public utilities
  • The considerations that go into determining the investment potential of a water project
  • The financial and related incentives that animate the impact investment community
  • Lessons from other sectors that could inform the successful development of performance- based water projects

• Lay the foundation for developing sustainable water projects appropriate for impact investment at the local level that are responsive to local public utility needs

The Brain Trust will attempt to produce a blueprint, or set of principles, for the development of sustainable water projects at the local level appropriate for impact investment. The blueprint will be intended to serve as a roadmap for investors, utilities and partners to use in assessing tangible opportunities and designing projects that meet critical public utility water supply, resilience and quality needs, provide ecological benefits, and also a reasonable investment return while keeping water affordable locally.

While not a stated or expected outcome or focus of effort, the brain trust exercise could potentially also result in the development of a specific impact investment project.

Proposed Approach: Convene a group of invited participants to meet for 6-9 months to talk through issues, barriers, options and solutions. Meetings/calls will be designed and structured to achieve maximum impact. WaterNow Alliance will serve as convenor and primary staff for the Brain Trust initiative, although it is anticipated that participants will all take on various tasks coming out of the discussions. The effort will be abandoned if it appears unlikely to produce a useful result.

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