Q: Why did ImpactAssets select this fund for the IA platform?
Margret: Across the world, more than 785 million people lack access to safe water and 2 billion people lack access to a toilet. To date, the global water and sanitation crisis has been relatively underserved by the impact investing community, with just a handful of impact fund managers dedicated to the theme. WaterEquity was the first fund manager to focus exclusively on water and sanitation and has built an impressive track record of investments in water and sanitation microloans across its two previous funds. Since spinning out of Water.org in 2017, WaterEquity has achieved 100% on-time repayment of its loans and has reached 1.6 million people living in poverty.
Additionally, the WaterEquity Global Access Fund offers strong financial return potential to our donors, in part thanks to the 2:1 debt-to-LP interest structure. With $100M of low-cost debt to be provided by the United States International Development Finance Corporation, the fund’s target net return to LPs is ~10-11%, nearly 2x the average Microfinance Investment Vehicle (MIV) return of ~5-6%.
Q: What's exciting to you about the fund's impact thesis?
Sandy: Lack of access to water, sanitation or hygiene affects one 1 in 3 people across the globe. The resulting unmet demand for water and sanitation microloans totals $18B, posing enormous opportunity for impact investors. From an impact angle, water and sanitation is a critical public health issue, with water, sanitation and hygiene-related diseases, such as cholera and dysentery, responsible for nearly one million deaths a year. Diarrheal disease is the second leading cause of death in children under five years old and is responsible for the death of 525K children each year. The WHO estimates that 88% of diarrheal disease is due to unsafe water supply or inadequate sanitation and hygiene. By providing microloans for the construction of projects such as piped water connections, septic systems, and handwashing facilities, WaterEquity’s Global Access Fund is directly supporting access to safe drinking water and improved sanitation and hygiene. This is especially important today, as being able to wash one’s hands is a basic and essential defense against COVID.
Q: Key insights from the due diligence process?
Erin: One insight from the due diligence process was WaterEquity’s strong network within the global water and sanitation microlending space. Through their past lending activity and partnership with Water.org, WaterEquity has relationships with 151 financial institutions with water and sanitation portfolios across 13 countries. The global reach of the WaterEquity investment team enables the fund to have an in-person presence in key target markets, which is beneficial both for monitoring of the existing fund portfolios and for generating pipeline for the Global Access Fund. As a result of their leadership in the water and sanitation space, well-established partnership network, and on-the-ground presence, WaterEquity has identified a diverse, high-quality pipeline for deployment of the entirety of the fund’s $150M target AUM.
Q: Who is this fund appropriate for?
Nick: The Global Access Fund is a good fit for someone seeking competitive financial returns of 10-11% and who has the appetite for emerging markets and currency risk. The fund has a seven-year term subject to two, one-year extensions, so an investor should be prepared to hold the investment anywhere between seven to nine years. In terms of impact, this fund will appeal to investors passionate about a wide range of impact themes, including poverty alleviation, public health, gender equality, decent work and economic growth, education, and climate resilience.
LEGAL AND PROGRAM DISCLAIMER: This is not a solicitation to buy or sell securities, nor a private placement offering pursuant to any private placement memorandum that must be issued to qualified investors. It is an informational description of charitably oriented, social purpose investment options that have been approved by ImpactAssets only for use in its donor advised fund asset base. It is only for use by its donors. Any allocation to private debt and equity investment options may result in losses and illiquidity that will be borne solely by each donor advised fund account with investment in these options, as will associated program fees. The minimum allocation per donor advised fund account per option is $10,000. Grant making from the principal value will not be possible until distributions are returned to The ImpactAssets Donor Advised Fund. There is no guarantee of any recovery of capital. No assurance can be given that investment objectives or targets/projected returns will be achieved. Actual target may vary and should not be considered or relied on as a performance guarantee. The Fund Manager has not approved the information contained in this Fund profile, including the assignment of risk ratings contained herein. The Units may be offered solely to, and subscriptions will be accepted only from “Accredited Investors,” as defined in Rule 501(a) of Regulation D promulgated under the authority of the Act, who are also “Qualified Clients,” as defined in Rule 205-3 of the United States Investment Advisers Act of 1940, as amended.