Addenda Capital is excited to introduce “Water” as a new investment theme within its Impact Fixed Income Pooled Fund, with fresh water as its inaugural focus area. This enables us to address issues related to the United Nations Sustainable Development Goal (SDG) no. 6, focused on clean water and sanitation.

Launched in 2018 as one of the first in Canada, our Impact Fixed Income Fund seeks to deliver positive social and environmental outcomes that are measurable and to generate compelling risk-adjusted investment returns. It was until now comprised of four investment themes: climate change, community development, health and wellness, and education.

Our water theme seeks investments that target projects such as improving access to drinking water and sanitation, water efficiency technologies, and nature-based solutions, including wetland and watershed restoration. The portfolio already includes investments under the new theme, more specifically securities designed to help improve access to water for communities and reinforce climate resilience of water infrastructure.

For Many, A Resource That Remains Out of Reach

Access to clean water and sanitation is a human right. Despite progress being made, over 2 billion people still lack access to safe managed drinking water and basic sanitation. Vulnerable communities are often disproportionately affected. In Canada, there still remains 28 long-term drinking water advisories within Indigenous communities – which often have deep cultural connections to water resources.  In developing countries, women and girls are most likely to be responsible for fetching water for households, spending sometimes hours each day, leading to inequities in access to education and a better life. Turning to the United States, Flint, Michigan, is the poster child of poor oversight and lack of investment in water systems where lead pipes, leached into municipal drinking water, impacting disproportionately a minority community struggling with poverty.

In addition, the quality of water has in many regions been degrading through urbanization, channelization, over-extraction and pollution by fertilizers and microplastics. Globally, an estimated half of wastewater is released into the environment untreated. Many of the waste now entering water bodies include chemicals of concern with potentially long term environmental or health impacts (1). A snapshot of the scale of this problem was provided by a recent study out of California highlighting that of 172 consumer product categories, 105 contained chemicals that were carcinogens or toxins with known reproductive or developmental impacts.

Engaging Companies on Water

Within the financial sector, various standards and organizations exist to promote the sustainable use of water, and to engage with water-intensive industries and companies. For example, the Ceres Valuing Water Finance Initiative, to which Addenda is an active member, is a global investor-led effort to engage companies with a high water footprint to value and act on water as a financial risk, and drive the necessary large-scale change to better protect water systems.

In the long term, addressing water challenges is not only essential to human and ecosystem health, but will also have systemic, far-reaching impacts on all global economies. The fact that the water crisis is exacerbated by climate change means it is even more urgent to drive capital market actors — including large institutional investors and major corporations — to address water issues.

1. Know, Kristin et al, Identifying Toxic Consumer Products: A Novel Data Set Reveals Air Emissions of Potent Carcinogens, Reproductive Toxicants, and Developmental Toxicants, Environmental Science and Technology 2023, 57, 7454-7465

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Impact Fixed Income
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