What is behind the underinvestment in water tech?
Water’s ubiquity might be its own worst enemy. Why worry about something that is usually so widely available? But in reality, global freshwater demand could soon outstrip supply by at least 40% by 2030, according to the UN.
This mismatch has resulted in chronic underinvestment in water technology which could resolve the critical mismanagement of the world’s water supply, according to a new BCG report.
“There are lakes on the world map that no longer really exist because humans have completely exhausted them — we’ve changed entire landscapes,” Vuk Trifkovic, managing director and partner at BCG X, the tech build and design division of BCG, and one of the report’s authors, tells Sifted.
The report estimates that the continued underinvestment (water tech only received a mere 4.5% of the funding allocated to climate tech in Europe in 2024) could result in staggering societal costs and irrevocable ecological damage, costing between $2trn to $10trn. And that’s because water is an index of much broader ecosystems, like that of soil and agriculture.
“The scarcity of water is moving faster than our ability to find a socially acceptable way to distribute it properly,” says Trifkovic, adding that ultimately, “without articulating the scale of investment needed a bit more clearly, we won't be able to attract enough investment that needs to be flowing from a variety of sources”.
Here’s what’s stopping the flow of investment into water tech.
A costly bet
Gaëtane Suzenet, cofounder of the European Water Tech Accelerator, has over 25 years experience in the water sector. She says that despite there in fact being lots of good water initiatives, very few make it off “the shelf” and even fewer exit onto the market — particularly in Europe as opposed to the US.
Water investment is not optional. The only real question is, is it going to happen smart, or is it going to happen stupid? “We need to make sure there is a combination between the take and the market fit”, which starts with “fixing issues with the startups themselves”, says Suzenet. Helping companies scale is precisely the impetus behind the European Water Tech Accelerator, the only dedicated thematic accelerator of its kind.
“Water investment is not optional. The only real question is, is it going to happen smart, or is it going to happen stupid?” says Charlie McGarraugh, chairman and lead investor of OceanWell, one of the startups taking part in the accelerator. LA-based OceanWell is developing efficient deepsea “water farms” which produce freshwater while protecting marine ecosystems.
Both McGarraugh and Suzenet highlight the FOAK — or first of its kind — issue that water technologies like OceanWell face: developing physical infrastructure for the first time is a costly bet.
“It’s not like a normal startup building something like a better dating app, where you move fast, break things, throw stuff up on the wall and see what sticks,” says McGarraugh. “We’re dealing with a combination of capital intensity and long duration.”
What is water really worth?
The BCG report — titled What Is Water Really Worth? — argues that better recognition of the value of water and pricing water more accurately could provide a clearer picture of financial returns and risks for investors, encouraging more investment. But currently Trifkovic says that we don’t have a universal way of measuring water’s value like we do with carbon.
We’re dealing with a combination of capital intensity and long duration. “We’ve already brought other planetary boundaries into a value framework. We know the price of carbon which is pretty weird when you think how abstract it really is,” he says.
To resolve this lack, BCG developed the Water Value Framework. By taking into account water's economic, social and environmental benefits, as well as where and how it is used, it is designed to capture the full value — and subsequent price — of water. This includes its marginal value, influenced by the relationship between changing circumstances, like water’s availability and human need.
“I love that the bottom line is the future optionality as well. Whoever is using it can express not only the immediate value extraction of water, but also how it can be used in a future sense,” says Trifkovic.
Making it rain
McGarraugh says that investment reluctance is exacerbated by the specificity of water’s intrinsically political and local nature, making it a highly regulated space.
Society's ability to build up better water infrastructure over the long run is basically unlimited because it creates rather than consumes value.
For this reason, Gaëtane says that there needs to be more public funding so “the market can see that yes, these techs have been proven, they can be deployed and scaled”. That’s when we can start to understand value “beyond a philosophical discussion”, so that it is “practical and relatable,” she adds.
Trifkovic agrees, adding that the magnitude of investment has to be a lot bigger than private equity.
“This is a much larger asset management problem where in some cases, it will need state intervention and policy investment,” he says, saying that there needs to be “a total global cultural mindset shift towards water.”
Because of this urgency, McGarraugh is optimistic for the future.
"Society's ability to build up better water infrastructure over the long run is basically unlimited because it creates rather than consumes value,” he says. “We know we're right and we have every willingness and increasing ability to deliver on something that really matters — and nothing will deter us from that.”
March 27, 2025
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