Water covers 70% of our planet, and it is easy to think that it will always be abundant. However, only 3% of the world’s water is fresh. Climate change, global population growth, and urbanisation are only exacerbating the availability of this precious resource. The World Bank estimates a 40% shortage between the available supply of water and the predicted demand by 2030.
Water challenges are particularly salient in urban areas, where more than half (55%) of the global population resides. The United Nations estimates that this figure will grow to 68% by 2050 - an increase that has critical implications for urban water demand. The use of more water will subsequently lead to more wastewater and water pollution. Add to this the growing impact of climate change on the urban water cycle and, the sheer magnitude of the water crisis becomes apparent.
The investment needed to achieve access to safe and affordable drinking water for all is vast. Global estimates range from $6.7 trillion by 2030, to $22.6 trillion by 2050. But, to date, a strong economic case for water-related investment has failed to translate into a compelling financial case for investment at scale, globally.
Water infrastructure is typically capital intensive, and furthermore most of the benefits derived from improvements in water infrastructure – to the public and private sectors – aren’t completely tangible and properly monetised. The lack of appropriate analytical tools and data to assess complex water-related investments deters financiers.
Historically, public finance has played a principal role in financing water investments. However, demands on public finance in emerging markets have increased across sectors and priorities are continuously changing. This is due to global challenges such as pandemics, climate change, and political unrest, and evolving local socio-economic needs.
The need for the private sector to step in and play a more active role in this sector is therefore imperative. What this brings is a more specialised expertise, access to more resources, less pressure on public resources, innovation, and more sustainable operations. A transition to a more circular economy.
An evolving circular economy requires sustainable financing
Circular economy principles have emerged as a response to the current unsustainable linear model of ‘take, make, consume, and waste’, and to make it work requires contribution from all stakeholders. Business innovation, regulatory reforms, and lifestyle changes need to go hand in hand with widespread awareness of the need for such transition and the roles of various stakeholders within different ecosystems.
In practical terms, a circular approach means developing water solutions, systems and technologies that reduce pressure on natural resources, minimise waste, and minimise environmental footprint. It’s a continuous pursue to recognise and capture the full value of water. To enable this, sustainable financing is required.
Metito recently secured a $120 million sustainability linked loan, a great example of how our mission to develop sustainable water management solutions is supported. This is the region’s first, and HSBC’s first, Environmental, Social, and Governance (ESG) Linked (Sustainability Linked) Funded Banking Facility in the water sector, and the single largest Group level banking facility ever arranged for Metito Holding.
As the ESG Coordinator, HSBC Bank Middle East helped Metito in linking four ambitious Sustainability Performance Targets (SPT) that are fully aligned with the company’s vision and its sustainability agenda. These will play an active role in securing a smart and sustainable water ecosystem, and include:
- Water Consumption: Increase the usage of recycled wastewater for district cooling plants in the UAE
- Water Source: Reuse of more recycled sewage water
- Wastewater Treatment: Boost the capacity of treated wastewater in the coming years
- Social Sustainability Target: Achieve a lower lost time to injury frequency rate (LTIFR)
The multiple tranche facility comprises a $50 million five-year revolving credit facility, a $50 million five-year term loan, and a $20 million guarantee facility. The loan will help address material ESG issues such as reducing water consumption and increasing wastewater treatment processes to achieve the full benefits of a circular water system.
Talal Ghandour, Chief Investment Officer at Metito.
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