A Week of Circularity: The Flow of Water

The UN World Water Development Report released this week highlights the devastating consequences of missing to connect water scarcity with climate change and emphasizes its severe health and safety consequences.

"Water, water everywhere. Nor any drop to drink". Samuel Taylor Coleridge's poem symbolizes the curse of water scarcity remarkably well.

While most investors have focused on overconsumption of water in production processes and, to a lesser extent, on the rights to water of indigenous populations, is that enough??

The flow of water, its intrinsic nature as carrier, holds tremendous promise for our society, serving as a vital resource for human life and an essential conduit to regenerative economic systems.

?? The Science of Impact

In nature, water constantly purifies and renews itself as it flows through the planet’s hydrological cycle. However, human activity has disrupted nature’s capacity to renew on her own as intensive industrial activities and urbanization have significantly impacted our water supplies over the past century.

"We've broken the water cycle, destriyed ecosystems and contaminated 
groundwater" UN's Chief António Guterres, World Water Day 2023        

Overconsumption, unsustainable use, and increased global temperatures all contribute to the global water crisis.

How would the redesign of the water cycle look like in the context of the circular economy?

By saying water is circular by nature because of its hydrological cycle, we really mean that we shouldn't want to ever discharge the water from a system. Circular economy principles offer an opportunity to recognize and capture the full value of water (as a service, an input to processes, a source of energy and a carrier of nutrients and other materials). For example, with circularity in mind, wastewater can become a source of freshwater and different water quality standards become acceptable depending on the end use. Cities such as Las Vegas, Singapore, Windhoek, and Berlin all recycle their water in different ways, allowing urban ecosystems to improve water security and greatly reduce costs while catering to the socio-economic activities of their respective geographies.?That’s the reason why, a circular water system needs to embrace resilience and inclusiveness as foundational design principles.

?? Circularity Roadmaps Explained

The case of águas de Portugal (AdP), as highlighted by the World Bank's Global Water Practice initiative WICER, offers an example where the redesign of the water cycle prioritizes resilience planning in a “downstream country” like Portugal. Over 70% of the country's annual water resources are generated in Spain, its neighbor to the north and east. Portugal has experienced increasing water scarcity events, especially in the southern region. As a result, and to foster efficient practices, the country has adopted integrated management practices for its water resources and environmental policies that acknowledge the entire water cycle.

How did it do that?

A journey that has taken 25 years to improve governance practices along with infrastructure, modernization of services along with advances in private sector policies and regulations. It's these improvements that have brought Portugal international recognition through the creation of AdP starting 1993.

As a state-owned holding company, AdP has managed water supply and wastewater systems in the country through 13 regional utilities, serving around 80% of the population and successfully expanding into international markets.

AdP defined a new strategic framework in 2020-2022 with a strict focus on designing circularity and resilience across its service markets, in particular for agriculture, industry, energy, and tourism – all vital sectors of the Portuguese economy. Therefore, Sludge, Water Use and Energy Neutrality have become its levers for the rollout of innovation locally and the management of socio-economic performance of its service portfolio.

A vital lesson learned: the transition to a model centered on circular economy and resilience requires a systemic approach that cuts across the entire society, engaging all parties in interactive cycles of learning. Through the right governance models, such as the creation of AdP VALOR, it has been able to accelerate changes by building a network of accountability among all stakeholders within and outside the urban water cycle.

?? Investing in the Circular Economy

Outside of the water sector, companies are facing increasing pressure to reduce their environmental impact, and the circular economy is contributing to this growing trend of environmental consciousness.

How can traditional investment managers best engage with the circular economy and improve their portfolio when investing in water?

Jann Breitenmoser, CIIA and yohann terry put it quite simply in their market commentary for the Man GLG Institute last summer, titled "The End of the Line":

Specifically, they see investment upside in three areas of water circularity:

1. Water disposal and recycling. Waste disposal and recycling firms may experience rapid growth due to a potential shift towards sustainable practices and increasing demand for recycled products. Firms with strong R&D capabilities are the ones to monitor for ongoing competitive advantage.
2. Consultancy and information services (related to product design, recycling, and water & waste management). Improved data, simulation, and monitoring services will be necessary to hit ambitious environmental targets, especially when it comes to the supply chain.
3. Specialist solutions companies exposed to highly polluting industries. These firms are able to solve technical, industry-specific environmental problems, and most often serve clients in industries such as mining, heavy industry, communication and technology infrastructure, fashion or packaging.

In a nutshell, the innovation efforts that underpin any advances in water circularity will happen across all the 4 Rs of the circular economy (Reduce, Reuse, Recycle, Replace):

• Reducing consumption in water-intensive industries. The mining industry offers the example of experimenting with dry separation techniques in mining to avoid freshwater demand.
• Reusing water in the production cycle. For example, replacing water?with treated wastewater?in concrete production, which ultimately minimizing the environmental damages of concrete production.
• Recycling water within the production cycle. Today, more than 90% of the water is recovered in the steel manufacturing process. This results in minimizing the water discharge altogether.
• Replacing water polluting materials. Plastic packaging offers an example since microplastics constitute the vast majority of surface?water marine plastics.

Traditional investors seeking to deliver circularity value in the redesign of the water cycle are encouraged to monitor the impact of all 4 R's on their portfolios.

???You don't want to miss this week...

From Istanbul to Melbourne, and London, this week offers new opportunities to connect with fellow circularity practitioners.?

Discover, grow and leave your mark!

March 27th-31st: Trade mission Circular Textile to Türkiye (in person, Istanbul and Bursa). The trade mission aims at introducing 12 Dutch organizations that offer circular or digital solutions to the textile and clothing industry to opportunities in the Turkish market. The event draws from to the market study "Defining Circularity of Textile Industry in Türkiye" commissioned by the Rijksdienst voor Ondernemend Nederland (RVO) in cooperation with Gulin Yucel of Brika Sürdürülebilirlik .

March 27th: MTalks: Scrapping the Take-Make-Waste Economy for Circular Design (free, in person at MPavilion, Melbourne). Through lightning talks and breakout group activities, hear from experts and leaders on the rise of biomaterials and regenerative design as a business model focused on people, planet, and purpose.

*Note on location: MPavilion is Australia’s leading architecture commission. This year,?it welcomes Pritzker Prize-winner? Tadao Ando , one of Japan’s leading contemporary architects. A master of light and lightness known for his striking geometric interventions in nature.?A must visit!

March 31st:?Circular Economy Finance (in person at Kings Place, London) Held during the 8th annual sustainability week by Economist Impact and moderated by Metabolic 's CEO Eva Gladek , the panel addresses "How to best fund the concept of circularity". Circularity finance is becoming more sophisticated, and in order to reorient capital at scale, more transparent and consistent data on circularity performance is required. The discussion will explore how companies can measure and report on circularity,?and will feature Moira Thomas , group sustainable business director at Currys plc , Noud Tillemans , CFO of Fairphone ; and Ian Nolan , Chair of the Investment Committee at Circularity Capital .

Honoring Women's History Month

The circular economy goes hand in hand with a sustainability strategy that seeks to deliver shared value beyond an individual organization.

Honoring Marcia Massotti, a member of the board of the?Global Compact Brazilian Network. During her 17-year tenure with?the team at?Enel Brasil, Marcia has worked to reach nearly 2 million beneficiaries each year through 400 sustainability projects, and to directly shape the dissemination of the SDGs in the country.

Off to another impactful week!