David Henderson: Why Water, Why Now?

When we launched XPV Water Partners well over a decade ago, people wondered why we decided to focus on water solutions. At the time water was not part of mainstream investing activity, nor was it a pressing priority for most governments or corporations. However, we believed it was only matter of time before this would change.   

Today, water challenges dominate the headlines. Many regions (for example, California, right now), are grappling with extreme drought and flooding at the same time. Infrastructure built decades ago is failing and cannot keep up with growing demand for water or the impacts of climate change. In many places, this means that water resources are no longer reliable. As a result, supply chains are slowing dramatically – even halting abruptly – the consistent production of food, power, and goods is uncertain, and, of course, everything costs more. 

Water is mission critical 

Water enables all life and production on planet earth, meaning that if a water process fails, the whole system fails. Furthermore, there is no substitute for water, and there are very few places in the world today where water can be directly used or discharged without some form of treatment. This makes water sustainability something none of us can ignore. According to GHD’s Aquanomics, water risk could wipe $5.6 trillion from GDP by 2050. 

Water is also one of the first ways the world is experiencing the impacts of climate change, making water availability and the efficiency of water-related processes a top priority for governments and industries that need to mitigate and adapt to climate challenges and meet sustainability goals. 

At the same time, population growth, industrialization, and urbanization are generating unprecedented global demand for water, driving a need for innovative solutions and technologies that improve the way we manage water and build resilience. 

Quite simply, we’ve reached a tipping point. 

Innovation is in demand 

These factors are driving a need for innovative solutions that extend the life of existing infrastructure, make operations smarter and more predictive using data and analytics, incorporate the values of a circular economy such as water reuse, and conserve limited water resources. There is a growing demand for solutions that help the world reduce pollution and emissions, adapt to new circumstances, and protect human health and ecosystems. 

Given the economic impact of water risk, there is also a strong push for all sectors to be accountable for the water they use. The world is demanding that they use less, pollute less, and report on their impact. Making significant changes to operations – and measuring the effectiveness of decisions – also requires innovation. 

The market for solutions is resilient 

This combination of structural forces combined with water being a limited, precious resource, means that the importance of reliable access is unshakeable. And that, in turn, means we need the right solutions and tools to build resilience. 

When innovative solutions answer that call, we’re seeing tremendous impact. Across XPV’s portfolio in 2022, for example, more than 90% of companies delivered record revenue growth. They expanded into new geographies, launched new products, and provided trusted solutions to customers. In addition to achieving great financial performance, we continue to make significant advancements in water sustainability, saving and recycling millions of gallons of water, lowering the energy and chemical use in water-related processes, and improving water quality and biodiversity of ecosystems. 

Building momentum 

The growth continues. In 2023, the world is now fully aware that these structural forces are not going away. Water remains mission critical; it is a need, not a want. The market for solutions is robust, and now, through major government and corporate initiatives, the money is flowing to solutions that build resilience.  

This focus on resilience, as well as equity and renewal, signals a sea change. We are no longer thinking about picks and shovels, we’re thinking about adapting to new circumstances and being ready for the future. At XPV, we’re excited about what this means for water – and for the world.