Editor’s Note: This guest blog post was authored by Alix Lebec, Director of Strategic Alliances at Water.org. Alix writes about the potential for impact investing to help address the global water crisis, which currently attracts far less funding than the WHO estimates is needed. She describes how Water.org has adopted this approach to leverage philanthropic capital and scale up their WaterCredit model in India.
Impact investing is gaining momentum worldwide. Seen as the future of double bottom-line investing – which seeks to measure investment performance in term of positive social impact, as well as fiscal performance, many believe this approach has the potential to leverage trillions in private capital to address social causes. Wealth holders are increasingly looking for ways to direct their resources and business acumen toward initiatives that generate financial returns and a positive impact at the same time, what we call “doing well by doing good.”
And while impact investing is still an evolving field, social entrepreneurial organizations such as Root Capital and Acumen Fund are paving the way with innovative finance models to accelerate progress toward alleviating poverty. We know there will never be enough philanthropy to tackle pervasive challenges such as the global water crisis that continue to cripple poor communities economically. The World Health Organization estimates that it will cost $200 billion in capital annually to solve the global water crisis over five years, and maintain the infrastructure. Currently, annual investments combined amount to roughly $9 billion, far short of what is needed to solve this crisis. Combining innovative financing, such as impact investing, with smart philanthropy presents one of the greatest opportunities to optimize social returns per philanthropic dollar invested, and scale solutions.
Today, there is a $12 billion demand globally among families at the base of the economic pyramid (BOP) for access to microfinance to meet their water supply and sanitation (WSS) needs. This is a huge market waiting to be discovered. Water.org’s WaterCredit model strives to tap into this demand, and enable local microfinance institutions (MFIs) to provide small and affordable loans to families at the BOP for WSS needs. To date, Water.org has directed $10.9 million in philanthropic capital toward its 51 MFI partners to help them jumpstart WaterCredit loan portfolios. As a result, these MFIs have attracted more than $100 million in commercial and social investment capital to provide WaterCredit loans. That’s $100 million Water.org did not need to fundraise from philanthropic supporters.
The impact? At a macro-level, this means this model leverages philanthropic resources to attract much larger pools of investment capital to address WSS needs at the BOP. At the household level, this means a family living in an urban slum in India, for instance, can participate as a customer, and pay for the construction of a toilet or water connection at home. Globally, Water.org has reached 2 million people through WaterCredit.
While this progress is encouraging, ongoing investment capital constraints for WSS lending at the BOP in key markets such as India still represent a significant barrier for scale. Our local MFI partners repeatedly emphasize how much more they could accomplish if they had access to greater and more reliable sources of social investment capital to meet the growing demand for WaterCredit. In its quest to continue attracting more capital to the water sector, Water.org saw this challenge as a unique opportunity to develop and launch the WaterCredit Investment Fund.
Building on the achievements of WaterCredit, this new $12 million Fund will connect, for the first time, social impact investors in the US and Europe directly with WSS needs at the BOP in India. Supporting Water.org’s highest performing MFI partners in this country, this Fund will provide a targeted, annual pre-tax return to investors of 2 percent. And while this is a modest financial return, the potential for social impact returns is tremendous, particularly as the Fund will help scale a proven model – WaterCredit.
Moreover, Water.org has identified $36 million in demand among just a handful of MFI partners in India alone for access to lower cost capital to scale their WaterCredit loan portfolios. Just imagine how much larger that demand becomes when looking at capital needs for WSS lending across India, and around the globe. Water.org plans to build on the lessons learned and achievements of its pilot WaterCredit Investment Fund to address these larger capital needs.
How is Water.org bringing this effort to life? By continuing to garner the support of leading strategic funding partners that have a strong appetite for innovation and embrace risk, and see the role catalytic philanthropy and impact investing can – together – play in achieving systemic change that works for the poor. Over the past few years, Water.org has secured $40 million in commitments from a growing community of change-makers and visionaries such as the IKEA Foundation, PepsiCo Foundation, The MasterCard Foundation and Caterpillar Foundation for its WaterCredit programs.
And while impact investing is still a new “tool in the toolbox” that needs time to develop, it is one that presents a great potential for creating a win-win-win situation – for the investors, the implementers and the recipients of impact. What better reason for Water.org to venture into this field in pursuit of scaling what already works?
We’re pleased to share that a recently released report from New Philanthropy Capital recognized WASHfunders.org as a top innovation in global philanthropy. The report, 10 Innovations in Global Philanthropy, praises the information on funding flows available through WASHfunders’ mapping tool and notes that the site reflects the broader push for open data in the philanthropic sector.
WASHfunders was also selected as the ‘Experts’ Top Pick’ among the innovations featured within the report, with Cath Tillotson of Scorpio Partnership commenting that, “If you define innovation as doing something differently, bigger or better, WASHfunders ticks all the boxes.”
WASHfunders and other innovations featured in the report will be discussed on a webinar to be held Wednesday, November 12th. Registration information and additional details are available here.
NPC’s report has been covered widely in philanthropic circles. Additional coverage includes an interview with WASHfunders’ lead, Seema Shah, on Philanthropy Age, a write up on Pro Bono Australia, and a mention on Health Affairs. In August, our Twitter feed was also cited as a top ten Twitter influencer in water and development by the Guardian.
We’re honored to receive the recognition and understand that the value of WASHfunders ultimately depends on our engagement with -- and usefulness to -- those working in the WASH sector! To contribute case studies, suggest recommended reading for the Knowledge Center, or submit a guest blog, contact us as firstname.lastname@example.org.
Editor’s Note: This guest post is authored by Greg Allgood, MSPH, PhD, Vice President at World Vision, where he helps lead their water, sanitation, and hygiene efforts. He is also the retired Founder of the P&G Children’s Safe Drinking Water Program. In his post, Dr. Allgood affirms that, despite recent focus on innovative business solutions in WASH, philanthropic institutions play a crucial role in solving the global water crisis. He also encourages implementing organizations to participate in a survey sponsored by World Vision that will generate aggregated estimates of the number of people reached with WASH. The survey can be accessed here.
I applaud the work to create sustained business models providing clean drinking water; however, we need to remember that philanthropy has a critical role in reaching the poorest of the poor.
As a person who spent 27 years with the private sector, I know the power of brands and the resources that can be mobilized based on using a for-profit model. And I believe that everyone should have clean water as well as adequate sanitation and hygiene that is sustained. But, I also know that the base of the pyramid -- the billions of people living in poverty -- represent a diverse population. Unfortunately, there are hundreds of millions of people who do not have clean water and cannot currently afford to pay for access to water.
In my visits to villages in the developing world, I frequently meet with people who do not have the resources to invest in clean water. Women have told me that they’d gladly pay for water if they had the money, but they can’t even afford the few pennies it takes to buy salt. People like these are probably best served by a philanthropic model that builds up the capacity of the community instead of investment in a for-profit model that may quickly fail and discourage future private sector investment.
In the development community, it seems recently that the voice for innovative business solutions to solve the global water crisis is drowning out the legitimate role of philanthropy. Both are needed. My organization, World Vision, -- like many other non-profit groups -- reaches into the hardest to reach places to provide clean water. We are playing a role to help enable governments to serve their people with clean water and to lift communities out of poverty so that the private sector can function.
Furthermore, I frequently hear that charity isn’t going to solve the problem of the global water crisis. This is a misleading statement. Philanthropy or charity is playing a big and critical role in solving the global water crisis. But, I agree that philanthropy alone will not solve the crisis. We need philanthropic and private sector investment as well as governments all playing their role.
The good news is that there’s growing confidence that we can solve the global water crisis by 2030. The scale of current efforts is estimated to reach 50,000 people a day in Sub-Saharan Africa with clean water. For perspective, World Vision, one of the largest providers of clean water, is reaching one new person with clean water every 30 seconds. And, we have plans to do even more.
While it’s true that there is still a gap that we need to fill to make sure that everyone has clean water, dignified sanitation, and proper hygiene, isn’t it best that we give adequate voice to the role of charity in solving the global water crisis?
In order to better quantify the role of philanthropy in doing their share to help solve the global water crisis, World Vision has commissioned a survey by KPMG. We are asking WASH implementing organizations to participate in a brief survey. It should take less than 20 minutes to complete. The survey results from all responding organizations will be used by KPMG to generate an aggregated estimate of the people who will be reached this year and next year with WASH. The overall purpose is to show the progress being made and the gaps needed to fill in order to solve the global water crisis. We anticipate that the combined tally of people being reached will be significant and help give a stronger voice to the legitimate and critical role of philanthropy.
Here is a link to the survey: KPMG World Vision survey
The 2020 Water Partnership aims to unite ONE DROP's expertise and unique approach to sustainable water and sanitation programs with the power of Rotary International's 1.2-million-member network in support of projects that expand access to clean water and sanitation. To that end, the two organizations will work to raise $5 million each and $10 million jointly, for a total investment of $20 million, for the 2020 Water Fund. The first program financed by the fund is set to begin this fall in Mali.
"The primary focus of our organization is on delivering sustainable water and sanitation programs on three continents and we are now more than ever determined to increase the scale and impact of our work through strategic partnerships," said Catherine B. Bachand, CEO of ONE DROP. "Between our partnership with Water For People and now Rotary, that’s $36 million in new direct investments in the countries where we operate, unleashing millions more in local and corporate funding, and we are just getting started."
"ONE DROP and Rotary launch the '2020 Water Partnership' to Provide Sustainable Water and Sanitation Access to Communities in Need on Three Continents With an Investment of $20M." ONE DROP Press Release 07/22/2014.
Last week, the UK-based Stone Family Foundation, in collaboration with New Philanthropy Capital, published a paper that summarizes 10 lessons learned as a WASH funder since the Foundation made the decision to concentrate much of its grantmaking in the sector in 2010.
How to Spend a Penny: 10 lessons from funding market-based approaches in water, sanitation and hygiene (PDF) presents lessons drawn from the Foundation’s experience that have helped it to target funding toward the most effective and sustainable solutions -- from the value of market-based solutions that go beyond the ‘toilets and taps’ approach to the importance of understanding customer motivations.
How to Spend a Penny also identifies challenges in WASH that philanthropy may be uniquely positioned to address. Noting the lack of high risk capital in the WASH sector, as well as the attendant risks of scaling up a solution too quickly, the paper describes how the Foundation identified one of its niche areas: providing support to projects that have gone through the pilot stages, but still need to refine their business models in order to become attractive to investors and other funders.
To learn more about the Stone Family Foundation’s investments in WASH – and those of other foundations active in the sector – view our Funder Profiles.
Editor’s Note: This post was authored by Sue Dorsey, chief financial officer at Water For People. In the post, Sue identifies several issues with current funding mechanisms in the social sector and proposes solutions that will support rather than hamper organizations in building resilience and realizing bold visions. The post originally appeared on Water For People’s blog.
In a sea of social entrepreneurs, I am a rather unique voice. As the CFO of Water For People, I am part of a team that makes our vision of ensuring Everyone around the world has access to safe water and sanitation, Forever, a reality. Our Everyone, Forever initiative spans 30 districts across four continents reaching more than four million people, and we are proving that ending water and sanitation poverty is possible in our lifetime. Behind every bold vision is a “reality team” working to bring it to life. Being a member of that team is a huge responsibility and incredibly inspiring.
I believe that a critical component to making a world free of social, cultural, political, and economic barriers a reality is building strong nonprofit organizations, businesses, and government institutions. Our vision is the spark, and resilient organizations with appropriate funding mechanisms and a regulated environment is the engine that will get us there. But as it stands, current practices in the nonprofit sector won’t get us there. Here’s why, and what needs to change:
1. Funders offer small short-term commitments forcing organizations to create short-term solutions for long-term challenges.
#ChangeThat: Funding streams need to adjust their timelines to fit long-term solutions and outcomes.
2. Nonprofits struggle with success indicators, putting too much focus on overhead ratios that are easy to calculate but also easy to manipulate, leading to misdirected philanthropic investments.
#ChangeThat: Making outcome-based grants requires nonprofits to focus on long-term sustainable outcomes.
3. Funders generally resist financing capacity-building, and only focus on tangible projects.
#ChangeThat: Financing monitoring and evaluation, talent acquisition and IT investments would actually increase efficiencies and reduce overhead.
4. Out of control donor restrictions lead to soaring overhead costs and trumps appropriate and necessary programmatic changes.
#ChangeThat: What if funding under $1M or less than five years could not legally be restricted under FASB rules?
5. Lack of public transparency for the true costs to run a nonprofit organization.
#ChangeThat: What if we got rid of the functional allocation and asked NPOs to report on a full cost recovery basis on their 990, educating and sensitizing the public on the real costs to change the world?
6. Limited to no communication between donors and NPOs about organizational pain points.
#ChangeThat: Donors should ask and nonprofits should offer insight into what they need to succeed from a programmatic and operational standpoint.
There is an exciting opportunity to bring the reality teams from behind the curtain to be a voice for change in the nonprofit sector, by educating donors and effecting change in organizations. We have seen examples of this - InsideNGO has created a community of international development organizations to advocate for effective funding from USAID and other institutional funders. They are currently working on a database of information around the true costs of running an effective organization. And Dan Pallotta has been a strong voice on this issue for years. His TedTalk about the way we think about and execute charity has over three million views and growing, which shows there is an appetite to reinvent the nonprofit sector so we can actually change the world.
If you peek behind the curtain, you will find “reality teams” around the world poised to lead this change.
I see a nonprofit sector stepping up and making investments in data collection and analysis to allow for more data-driven decision-making. I see nonprofits sharing indicators and data across sectors to align us around a common set of benchmarks, providing a clearer picture of what success looks like and progress made towards that success. Greater transparency and accountability will build trust and collaboration with the funding community, and this will lead donors to reduce burdensome and unnecessary restrictions that only serve to increase overhead and reduce programmatic outcomes. I see government regulation pulling back from functional allocation to ensure nonprofits show the public a true picture of what it costs to run an effective, sustainable philanthropic organization.
Reaching our vision where Everyone has access to safe water and sanitation Forever is something we take very seriously. Anything less would just not be good enough.
The Bill & Melinda Gates Foundation and India's Biotechnology Industry Research Assistance Council have announced the winners of the Reinvent the Toilet Challenge: India.
Six organizations were awarded grants totaling $2 million to develop innovative "next-generation toilets" that can deliver safe, affordable, and sustainable sanitation solutions in India. A collaboration between the Gates Foundation, BIRAC, and the Indian Ministry of Science and Technology, the competition is funded by investments of $1 million each from the Gates Foundation and the ministry's Department of Biotechnology.
Announced at the "Reinvent the Toilet Fair: India" in New Delhi, the grant recipients are Eram Scientific Solutions, which, in partnership with the University of South Florida, will field test a solar-powered modular electronic toilet that is integrated with a mixed-waste processing unit; the Amrita School of Biotechnology, which will test the use of viral agents to kill pathogens and odor-producing bacteria in fecal waste; Pradin Technologies, which will test the viability of using ultrasound to reduce water use in toilets; the Indian Institute of Technology Roorkee, which, in partnership with Fresh Rooms Life Sciences, will develop a single-household container that uses human feces to incubate black soldier fly larvae, which can be processed into marketable products; the Institute of Chemical Technology, which will evaluate the concept of using fine sand-like material and an air blower to create a water-free toilet interface free of odor and flies; and BITS Pilani K.K. Birla Goa Campus, which, in partnership with Ghent University and Sustainable Biosolutions, will design a septic tank that uses electrochemistry to reduce organic pollutants and improve the quality of discharged effluent.
"Effective and comprehensive sanitation seems an impossible dream for India," said BIRAC chair K. Vijay Raghavan. "Yet today we see a congruence of new and applicable science and technology, its affordability, and sustainable implementation. This congruence is a great opportunity, which we cannot afford to let slip. By implementing effective solutions in each kind of social context, big problems can be dealt with in small units and be catalysts for scaling up."
The Gates Foundation also announced a partnership with South Africa's Department of Science and Technology to field test technologies developed as part of the global Reinvent the Toilet Challenge. The foundation and DST will invest $1 million and approximately $2.76 million (30 million rand), respectively, in the effort.
"By applying creative thinking and new approaches to sanitation challenges, we can improve people's lives. And we have no doubt that these new partnerships with India and South Africa will help us achieve this," said Brian Arbogast, director of the Water, Sanitation & Hygiene team at the Gates Foundation. "We believe that with governmental leadership, new business models, and innovation, we can dramatically increase the progress made in tackling this global sanitation crisis."
"Indian Researchers Selected to Develop Next Generation Toilets." Bill & Melinda Gates Foundation Press Release 03/22/2014.
The International Water and Sanitation Centre (IRC) in The Hague has announced a $3 million grant from the Conrad N. Hilton Foundation in support of efforts to provide access to clean water in rural Ghana.
The grant will support IRC's work with the Ghanaian government to bring national and local partners together on efforts to provide sustainable water services for 1.3 million people in thirteen rural districts. The project, which is focused on building the government's capacity to deliver and maintain water services rather than taking the more conventional approach of installing hardware, will scale earlier efforts by the IRC in partnership with Ghanaian government agencies and communities in three districts.
"IRC believes strongly that strengthening the ability of governments to lead the provision of services is not only the best route to scale, but the only viable exit strategy for charitable giving," said IRC chief executive Patrick Moriarty. "By supporting our work in Ghana, the Conrad N. Hilton Foundation is giving strong support to the achievement of our vision of providing everyone in Ghana with water services that will last forever — without the need for endless charitable donations."
"We have been working with our partners in Ghana to increase access to safe water for more than twenty years," said Steven M. Hilton, board chair, president, and CEO of the Conrad N. Hilton Foundation. "We're teaming up with IRC to build on our experience and focus on improving how water systems are managed. This grant will help contribute towards providing reliable safe water into the future."
"Conrad N. Hilton Foundation Backs IRC With US $3 Million for Work in Ghana." International Water and Sanitation Centre Press Release 03/18/2014.
Vermont-based specialty coffee company Keurig Green Mountain has announced grants totaling $11 million to four nonprofit organizations working in the United States and abroad to promote water security.
Grant recipients include charity: water, which will use the funds to help one million people gain access to clean drinking water by 2020; the Global Water Initiative, which was created by the Howard G. Buffett Foundation in partnership with CARE, Catholic Relief Services, the International Institute for Environment and Development, and the International Union for Conservation of Nature and will use its grant to improve management of water resources in coffee-growing areas of Central America; Raise the River, a coalition of conservation NGOs working within a U.S.-Mexico policy framework to restore the Colorado River Delta by reconnecting the Colorado River to the Gulf of California; and American Rivers, with which Keurig has partnered for several years to help communities clean up and restore local rivers.
Keurig also announced that it would work to reduce the water footprint of its processes and products and will convene water experts at its first annual water summit later this year to discuss solutions to the global water crisis.
"Freshwater resources are dwindling and communities throughout the world are threatened with scarcity," said Brian Kelley, president and CEO of Keurig Green Mountain. "Water is a critical natural resource that is fundamentally important to our company, our consumers, our stakeholders, and our supply chain. As a business and as global citizens, we have a responsibility to promote good water stewardship in the world."
"Keurig Green Mountain Funds Four Organizations with $11 Million Water Commitment." Keurig Green Mountain Press Release 03/19/2014.
The Sanitation Financing Partnership Trust Fund, an initiative of the Bill & Melinda Gates Foundation and the Asian Development Bank, has awarded three grants to help provide safe sanitation facilities in urban and rural communities across Asia.
Created in 2013 with $15 million from the Gates Foundation and administered by ADB, the fund will leverage more than $28 million in financing over the next five years for non-sewered sanitation and septage management projects across Asia. Grants announced by the fund include $2 million for ADB’s Facility for Pilot and Demonstration Activity, which will test and validate pilot approaches to new sanitation management and water services delivery policies, technologies, and business models, with the goal of replicating and scaling successful approaches across the region; and $1.6 million for pilot innovations in septage collection and treatment systems in eight coastal towns in Bangladesh. Part of a planned ADB loan to Bangladesh for infrastructure improvements, the grant also will support efforts to improve septage operation and maintenance, and to promote private-sector participation in septage management.
In addition, the fund awarded a grant to the South Asia Urban Knowledge Hub (k-hub), a network of four research and training institutions in Bangladesh, India, Nepal, and Sri Lanka supported by ADB that works to facilitate information and learning exchange among city managers, utility staff, policy makers, academics, and the private sector.
"We will continue to work with the governments in Asia-Pacific region to make countries open defecation-free and complement their efforts by providing options for small-scale sanitation systems in urban and rural communities," said Amy Leung, director of the Urban Development and Water Division in ADB's Southeast Asia Department. "We are proud to support new testing and pilot implementation of innovative solutions to hasten access to safe sanitation for Asia’s urban poor."
"Open defecation and inadequate toilets, sewers, and wastewater treatment systems lead to massive amounts of untreated human waste in the environment, harming the health and well-being of children," said Brian Arbogast, director of the Water, Sanitation & Hygiene team at the Gates Foundation. "We are delighted to have new partners like the ADB applying creative thinking to more effectively managing human waste to improve people’s lives."
"Three New Projects Receive Funding Across Asia to Improve Safe Sanitation." Bill & Melinda Gates Foundation Press Release 03/11/2014.
"ADB, Gates Foundation Launch Initiatives to Spur Sanitation Innovation." Asian Development Bank Press Release 03/12/2014.