Freshwater is critical for basic human needs, ecosystem services, agriculture, industry, power generation and more. However, freshwater systems, which represent less than 3% of the world’s water, are becoming increasingly stressed. Through inefficient use and overuse of freshwater, and as a result of variability brought on by global climate change, surface water reservoirs, groundwater storage, and permanent aquifers are depleting rapidly, increasing the supply risk for all users, including the environment.
These stresses are particularly acute in the drought-stricken American West, where demand for water from the Colorado River—which supports 40 million people, 5.5 million acres of irrigated farmland, and 20% of U.S. GDP—has outstripped supply since 2003. As a result, the region is witnessing water shortages, low streamflow, declining soil and water quality, poor forest health, and the spread of invasive species. With traditional infrastructure solutions and public and philanthropic sources of capital unable to fully address the need for change, Encourage Capital sees an opportunity to deploy private capital to generate a more efficient allocation and use of water in watersheds facing drought, scarcity, and high water risk, beginning with the Colorado River Basin.
Encourage Capital is developing investment strategies that preserve and conserve water through investments such as irrigation infrastructure upgrades, sustainable land management, and pay-for-performance structures that protect watersheds.
The Colorado River has not flowed to the ocean since the 1960s.
Although water scarcity has long been a defining theme in the history of the American West, the extent and scale of the issues that are now facing the region are unprecedented. As a result of decades of massive economic expansion in the arid Western States, these water problems are no longer just local or regional problems — they are national problems, affecting critical municipal and industrial centers and agricultural regions that represent a substantial portion of U.S. GDP. At Encourage Capital, we have focused on the Colorado River Basin, one of the most water-stressed watersheds in the Western United States, and one of the most heavily regulated and developed river systems in the world. We have worked with our partners to identify potential impact investment strategies that could be successfully deployed to finance water resource solutions, generate related environmental benefits, and potentially create a financial return.
For example, the conversion of farmland to less water-intensive (and in many cases higher-value) crops, the use of deficit irrigation techniques on compatible crops, together with the introduction of water use efficiency improvements and approaches such as land leveling, drip irrigation, use of cover crops, and conservation tillage techniques — may create potential opportunities to improve agricultural outputs in both returns per acre and returns per unit of water. At the same time, these more sustainable approaches to agriculture can potentially reduce the consumptive use of water by agricultural uses without changing the amount of land in production, generating water savings that could be transferred to other uses, including efficient agriculture, municipalities and the environment.
Please download our report, LIQUID ASSETS: Investing for Impact in the Colorado River Basin its Executive Summary or the mobile version.