Investments aligned with this strategic goal aim to expand access by improving the quantity, reliability, and safety of water supplied by water service providers. This includes expanding pipes, applying operational efficiencies, and implementing green technology.

The sections below include an overview of the strategy for achieving desired goals, supporting evidence, a starter kit of metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Inadequate access to safe water and sanitation underpins many of the challenges related to health faced by households in poverty. Moreover, families in the bottom income quintiles often spend more than 20% of their income on water, further exacerbating the cycle of poverty (1, 2). Today, two billion people lack access to safe household drinking water (3). Nearly one million people die each year from diseases related to lack of water, sanitation, or hygiene (4), and every two minutes a child dies from a water-related disease (5).

Access to safe water improves household health and helps prevent the spread of infectious disease. After decades of underinvestment in water infrastructure to source, treat, and deliver water, water utilities and service providers in low- and middle-income countries struggle to maintain infrastructure, sustain operations, and keep pace with population growth in towns and cities.

Investments in piped water that aim to increase its quantity, quality, reliability, safety, and availability can:

  • connect new customers to an existing piped network, expand an existing piped network, or develop new water supply systems;
  • improve the management of water service providers, including large utility companies and small water operators, by reducing non-revenue water, improving tariff collection, and improving water quality, as well as improving other management practices. More efficient and better-run service providers can deliver safer water more reliably.
  • increase the sustainability of water supply by introducing new technology, especially less carbon-intensive technologies, to deliver water more efficiently at lower cost. Further, investments in interim solutions, such as water kiosks, can provide many of the benefits of piped water, like improved water quality.

What is the scale of the problem?

According to the World Health Organization, two billion people, or 29% of the world’s population, do not have access to safely managed water, defined as water that is available on premises, free from contamination, and available when needed (6). More than 1.8 billion people use a source of drinking water that is contaminated by fecal matter, putting them at risk for water- and sanitation-related diseases, while 159 million people depend on untreated surface water, including lakes and rivers (3). The World Economic Forum recently rated access to water as the fourth-greatest global risk in terms of its impact on society (7).

A universal challenge among water service providers is the considerable difference between the amount of water entering the distribution system and the amount of water that is billed to customers, which is termed non-revenue water. The World Bank estimates that roughly 45 million cubic meters of water are lost daily as non-revenue water, enough to serve nearly 200 million people. The total estimated cost to utility providers of non-revenue water is, conservatively, USD 14 billion per year (8).

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Low-income households: Time spent gathering water or seeking safe sanitation leads to billions of dollars in lost economic opportunities on top of losses from poorer health outcomes. An estimated USD 260 billion is lost globally each year due to insufficient basic water and sanitation (9). Safe water and sanitation at home through piped water service gives low-income families more time to pursue education and work opportunities. Meanwhile, households that already have piped water on premises can benefit from improved reliability and quality of existing service. In general, more low-income households lack safely managed access to water than wealthier households; investments that target inclusive or “pro-poor” access can benefit these families.

Women and girls: Women and girls overwhelmingly bear primary responsibility for collecting water, doing so for 80% of all households worldwide with water off-premises (10). Altogether, women and girls spend 200 million hours every day collecting water (11), taking time away from income-generating activities, school, or caring for family.

Children: Children often collect water for their families, taking time away from school and play. Evidence from Yemen and Pakistan indicates that a one-hour reduction in time children spend collecting water would increase these countries’ respective school enrollment rates by 8–9% and 18–19% (12).

Water service providers: The World Bank estimates that 32 billion cubic meters of treated and distributed water is lost annually as non-revenue water (for example, from leaky pipes), half of which is lost in developing countries. Water utilities incur major financial costs treating and pumping water that then leaves the system before being sold (13). Reducing the amount of non-revenue water would boost revenues for utilities and improve water quality and customer satisfaction.

The climate: Non-revenue water also contributes to climate change. Water treatment and distribution require an enormous amount of energy, the production of which typically emits harmful CO2. Green technology can reduce water withdrawal, lower CO2 emissions, and reduce water pollution. Minimizing leaks saves both water and energy (14).

What are the geographic attributes of those who are affected?

The geographic coverage of safely managed drinking water varies widely across countries, ranging from 6% to 100% coverage. Regionally, sub-Saharan Africa has the least coverage of safely managed water access (just 12% of the rural population and 50% of the urban population), followed by Central and South Asia (3).

An estimated 55% of the rural population and 85% of the urban population worldwide use safely managed WASH services (3). Financing gaps are global, with more than 80% of countries reporting insufficient funds to meet their national water goals (15). While only a third of people living in rural areas use safely managed drinking water, urban areas are expected to absorb all of the world’s population growth over the next four decades (16). The vast majority of people at that point will live in overcrowded slums with inadequate water services (16). Urban resources and planning will face mounting challenges in keeping up with this growth rate, especially given climate change. In major cities like Cape Town, South Africa, and Chennai, India, the demand for water often exceeds the supply. Increasing water stress and drought will make it critical to improve the efficiency of water management, including repairs to leaky pipes.

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

The world’s needs for safely managed water and sanitation cannot be met by current financing, which falls short by USD 89 billion per year (18). New sources of capital will be critical to achieve universal access to safe drinking water. This gap in investment only includes the costs of constructing new infrastructure, not the ongoing costs of infrastructure's operation and maintenance.

To close the gap in financing for water service providers, organizations investing in projects that improve water infrastructure and management can contribute toward solutions by:

  • Signal that impact matters. By investing in projects targeting positive WASH outcomes, investors signal that impact matters within their portfolios.
  • Engage actively. Investors can use their expertise and networks to improve performance of businesses related to WASH outcomes. Engagement can include a variety of approaches ranging from dialogue with investees to hands-on management support. For further details, see A Guide to Classifying the Impact of an Investment.
  • Growing new or undersupplied capital markets by encouraging the private sector to invest in projects that address water supply. Small or medium-sized water service providers in developing countries can thereby gain access to capital markets even if they would not otherwise meet the credit requirements of most commercial lenders. Blended models have proven to be an effective and creditworthy approach for water utilities to improve, for instance, their operational efficiency and financial sustainability (19), which in turn increases water quality and supply for their customers.
  • Providing flexible capital to enable water service providers to reduce non-revenue water lost from leaky pipes and faulty metering, increasing water supply, quality, and service and improving their financial sustainability.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

According to the World Health Organization (6), of the two billion people who lack safely managed water, 1.4 billion have a water service sometimes or always contaminated by fecal matter or chemical contamination, 206 million require 30 minutes or more to collect water, 435 million take water from unprotected wells and springs, and 144 million collect untreated surface water from sources such as lakes, ponds, rivers, and streams.

Improvements to water supply infrastructure and service delivery can reach a large majority of the two billion people that lack access to safely managed water. The number of people benefiting from specific investments depends on multiple contextual factors, including the size of an individual investment, the costs required, and the population size (current and potential) serviced by a water service provider.

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

Access to safe water can protect and save lives and help families break the cycle of poverty. Safe water piped directly to a household turns time spent collecting water into time saved. Examples of impact from improved water infrastructure include the following:

  • Every USD 1 invested in water provides a USD 2 economic return given health care gains, increased productivity, and averted mortality (9).
  • An overwhelming body of literature shows that access to water reduces infant and child mortality rates. A 2012 study (17) utilizing databases from the World Bank, World Health Organization, and UNICEF across 193 countries found that every quartile increase in access to water and sanitation, respectively, at the population level decreases under-five mortality by 1.17 and 1.66 deaths per 1,000 live births.

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

Impact risk factors identified by experts as material for this Strategic Goal include:

  • Execution Risk: Activities may not be delivered as planned, and the quality of service may not improve. Execution risk may also jeopardize long-term investment by sending negative signals to other investors. Investors can mitigate execution risks by ensuring that investees have in place qualified staff, competent engineers, dedicated management, and legal and political decision-makers in place to drive plans for the project's operations, information management, and finances.

  • External Risk: External risk factors may disrupt the provider’s ability to deliver the expected impact. Examples include climate change–related natural disasters, inflation, and socio-political shifts that lead to regulatory changes. Climate change, for example, threatens water quality by altering the types and levels of contaminants and increasing treatment needs. Desertification, for example, can affect cost of water infrastructure--costs can fluctuate significantly depending on how far water needs to travel and how frequently infrastructure needs maintenance. External risks can be mitigated by assessing the impact of potential shifts and through strong planning, management, and systemic tracking. Improvements to infrastructure should also adequately account for changes likely to derive from climate change.

  • Stakeholder Risk: Utilities may not be able to access financing on terms sufficient to expand their networks while covering operating costs and generating returns to capital. Financing small-scale distribution of clean water projects may require long loan tenors. Risks in this vein can be mitigated by setting appropriate loan terms, designing a long-term business plan, and allocating dedicated resources to addressing non-revenue water. Investors in this strategy should also take particular care to exit their investments responsibly.

Furthermore, price may become a constraint for low-income consumers, especially if private sector involvement leads to higher tariffs or connection fees. On the other hand, tariffs that are set too low may not cover the service provider’s operating costs. Investors and investees should therefore thoroughly study the local market and understand consumers’ willingness to pay.

What are likely consequences of these impact risk factors?

These risk factors could lead service providers to remain undercapitalized, operationally inefficient, wasteful of energy and water resources, or a combination of these characteristics. The investment may fail to provide households with safely managed access.

Illustrative Investment

Khmer Water Supply Holding (KWSH) owns and operates micro-piped-water utilities with unrealized potential in rural Cambodia. KWSH’s strategy is to leverage its centralized technical expertise, fundraising capacity, and business acumen across a portfolio of stations to increase their potential and reach, thereby facilitating affordable access to safe water for neighboring communities. The company was established in 2013 as a greenfield investment by Insitor Partners in partnership with a local consulting firm. Since then, it has received USD 4.6 million in additional investment from other investors and foundations. Today, KWSH has four utilities in its portfolio with consolidated reach of 25,000 households (more than 100,000 individuals).

The Private Infrastructure Development Group (PIDG) financed the Kigali Bulk Water PPP Project, a large-scale water treatment plant that will supply clean water to up to 500,000 customers in Rwanda, with blended financing (USD 40 million loan) for the USD 61 million plant. Kigali Water Limited is one of the first water projects in sub-Saharan Africa to be developed through a public-private partnership (PPP). The invested finance gave the Rwandan government the security it needed to proceed with a project that would be affordable for everyone, including the end users. The project illustrates how private investors can reduce risk for local and national governments and private service providers.

In Kenya, community-based organizations (CBOs) supply many peri-urban and rural areas with drinking water. CBOs operate some 1,200 small piped water systems throughout the country, serving 3.7 million people. Much of this infrastructure is run-down as a result of underinvestment. To address capital constraints, a blended finance program, initiated in 2006, combines commercial debt with subsidies. Since the program’s inception, K-Rep Bank (now Sidian Bank) has lent USD 1 million to 12 CBOs, nine of which have completed implementation of their projects and have received subsidies (as of 2011).

The Development Bank of Southern Africa’s (DBSA) Climate Finance Facility (CFF) is a specialized lending facility designed to increase private investment in climate-related infrastructure projects in South Africa, which faces significant challenges in climate mitigation and adaptation. Eligible projects include those in energy and water efficiency. The CFF is the first time the “green bank” model has been applied to an emerging market. This landmark facility offers substantial proof-of concept value to middle- and low-income countries seeking the considerable private investment they will require to meet the commitments laid out under the Paris Agreement. The CFF raised an initial USD 110 million, with DBSA and the Green Climate Fund (GCF) as the two anchor funders (20).

Have an investment the GIIN should consider including here? Let us know!

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 4
Detailed Review of a Recent Publication: Intermittent water supply jeopardizes water quality and costs users and utilities money

Bivins, Aaron W., Summer, Tren, Kumpel, Emily, Howard, Guy, Cumming Olivery, Ross, Ian, Nelson, Kara, et al. “Detailed Review of a Recent Publication: Intermittent water supply jeopardizes water quality and costs users and utilities money.” Issue #7 (2017)

NESTA: 3
Does household access to improved water and sanitation in infancy and childhood predict better vocabulary test performance in Ethiopian, Indian, Peruvian and Vietnamese cohort studies

Dearden, Kirk, Brennan, T. Alana, Behrman R. Jere, Schott, Whitney, Crookston T., Benjamin, Humphries, Debbie, Penny, Mary, et. al. “Does household access to improved water and sanitation in infancy and childhood predict better vocabulary test performance in Ethiopian, Indian, Peruvian and Vietnamese cohort studies.“BMJ Open (2017).

NESTA: 3
Water Expansions in Shantytowns: Health and Savings

Galian, Sebastian, Gonzalex-Rozada, Schargrodsky Ernesto. “Water Expansions in Shantytowns: Health and Savings.” Inter-American Development Banco Paper #R-527. (2007).

NESTA: 3
The Child Health Implications of Privatizing Africa's Urban Water Supply

Kosec, Katrina. “The Child Health Implications of Privatizing Africa’s Urban Water Supply.” International Food Policy Research Institute. Discussion Paper 01269. (2013).

NESTA: 3
Water Quality, Brawn, and Education. The Rural Drinking Water Program in China

Xu, Lixin C., Zhang Jing. “Water Quality, Brawn, and Education: The Rural Drinking Water Program in China.” World Bank Group Policy Research Working Paper 7054 (2014).

NESTA: 2
Building and Cities Water Distribution

Building and Cities Water Distribution, Project Drawdown, 6 Sept. 2019 www.drawdown.org/solutions/buildings-and-cities/water-distribution)

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.