Peak Sustainability Ventures: Early-stage Water Investing in India

By Samir Shah 23 May, 2023

Isn’t it ironic that the modern age of AI co-exists with a billion people that don’t have access to clean drinking water? We chat with Shah, Managing Partner of Peak Sustainability Ventures who doesn’t think only investing in ‘sexy’ tech will solve our water problems

Investing in water (SDG 6) is key due to its ‘spillover effects’ in all aspects; but it is complex without a single universal solution, plus lacks full understanding & “Tragedy of the Commons” is an issue
For water we must focus on centralized solutions for large communities & decentralized solutions for smaller communities
It's beyond capital availability or ‘sexier’ tech; Water is a locational source & requires deeper understanding; Existing tech must be scaled & applied to the right context
Samir Shah
Author: Samir Shah
Samir is extremely passionate about sustainability and has a deep knowledge in energy, food systems, water and climate tech through his investments, affiliations and associations with various organizations over the past 10 years. He is the Managing Principal at Peak Sustainability Ventures, a firm based in India focusing on sustainable investments globally. Through the fund and family office, he has investments in over 17 companies in this space. Samir is also an Adjunct Professor at Ahmedabad University, teaching an MBA course titled "Sustainability, Business and Society" . Samir has been involved in global public and private markets for the past 28 years. Samir ran a multi-strategy hedge fund in Hong Kong, and previously held senior principal risk-taking positions at Goldman Sachs (Hong Kong), Salomon Brothers (New York, Hong Kong) and Deutsche Bank (New York). He graduated with an MBA from Wharton (with distinction), and holds a Law degree and Bachelor of Commerce degree from Bombay University. He is qualified as a Chartered Accountant from India. He can be reached on [email protected]
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Peak Sustainability Ventures and its associates identify and invest in purpose-driven entrepreneurs looking to make a difference in the world and shape our collective future. Peak Sustainability Ventures has been deeply involved in sustainability through the last decade and uses its domain knowledge to invest in areas it believes to be the most compelling and impactful at a large-scale.

For Peak Sustainability Ventures, sustainability is not a theme, nor a fad. It is a way of thinking. One out of the four verticals it focusses on is water, as clean water is a core necessity for human existence, yet not everyone has access to it. Under its water theme, Peak Sustainability Ventures supports companies that help ensure water security globally – in India they mainly focus on ensuring freshwater availability as water scarcity is a considerable problem in many of its cities. We chat with Samir Shah, Managing Partner of Peak Sustainability Ventures, to find out more about their investments in the thriving start-up ecosystem that aims to solve interconnected problems, especially water.

CWR: Can you tell us why you decided to start Peak Sustainability Ventures? And really why you decided to go from a mainstream VC model to early-stage climate investing in India?

Samir Shah (SS): I had been in global markets investing for a period of 27 years in New York and Hong Kong. After moving back to India in 2015, my interests changed from global markets to getting involved in the thriving start-up ecosystem in India. While I enjoyed my time in global markets, I now find increased satisfaction in working with entrepreneurs addressing complex problems.

Peak Ventures has 4 broad sustainable investment verticals: New Energy, Water, Food Systems, & broader areas of Climate

As these 4 provide significant opportunities & require urgent action to meet the 2030 and 2050 climate agenda

Our first investment in sustainability dates back to 2008 in VA Tech Wabag, a pre-IPO company at the time of our investment, which today is one of the largest companies in water within the private sector. Since then, we have made 17 investments within the sustainability space. At Peak, we intend to achieve meaningful outcomes in sustainability through our investments. We focus on achieving attractive risk-adjusted returns while having positive externalities on the climate, by providing capital and guidance to purpose-driven entrepreneurs building scalable and globally impactful businesses that will shape our collective future. We see no conflict in these objectives, and importantly, this is also shown in our results achieved to date.

We are one of the few institutional funds based in India that focus only on sustainability. For us, we have defined sustainability within four broad verticals: New Energy, which includes all areas outside of fossil fuels; Water; Food Systems; and broader areas of Climate, including plastics, biodiversity, and data analytics. We believe these four areas will present significant business opportunities and require immediate attention, given the 2030 and 2050 climate agenda as well as the IPCC reports indicating the need for urgent action. We believe this area also requires significant and differentiated domain knowledge and deep expertise, which we have built over the last few years. This resulted in our decision to focus our attention on sustainability. We are committed to this space and we see this space as crucial to the investment landscape and to all of us as a society.

CWR: Tying it all down into those four must’ve taken you quite a long time. Because sustainability is very broad. Can you go through why those 4? And also more about the water side?

SS: Yes, you are right. It did take some thought and effort to determine our areas of focus. While all 17 SDG’s are important, we have chosen to focus on these four, as they are areas where we have built expertise over the years. Importantly, they are all interconnected in a meaningful way. They also drive outcomes in the other SDG’s. The complexities of nature and the non-linear effects are hard to precisely determine for all outcomes. However, the close connections are easier to understand.

Out of the 17 SDGs the 4 were chosen due to their interconnectivity & spillover effects …

… e.g food systems affects the water cycle … water availability affect food output etc.

For example, what happens in food systems affects the water cycle. Availability of water affects food output. Green hydrogen requires 9 kilograms of de-ionized water for each kilogram of hydrogen. Agriculture uses 70+ percent of water globally. Drip irrigation would result in substantial water savings. We could address the water crisis using desalination, which uses a lot of energy, if we had clean energy at a low price. While there are no easy answers or closed-form solutions in sustainability, a balanced approach considering all factors needs to be taken. Climate change is a global problem and needs solutions that can scale globally.

A deep understanding of natural systems, investment considerations, climate goals and desired outcomes is necessary to make successful investments in this space. Without accelerated efforts we are not likely to achieve the 2030 goals and may run the risk of crossing planetary boundaries with severe negative effects.

Specifically regarding water, we believe this is a serious problem area that is not given as much attention as the race to net zero on GHG’s. Water is essential to our very existence. If we do not act soon and decisively, we will face serious water issues. Several cities are predicted to run out of water in the next decade. Availability of ground water is at serious risk, with the excessive use much higher than the rate of replenishment.

But water is neglected & not given as much attention as race to net zero on GHG …

… it also cannot be solved by “apps” & need localised intervention at a ground level

Availability of safe drinking water is causing severe health issues, particularly in emerging markets. The spillover effects of water on human health, productivity, quality of life and finances of the economically weaker sections of society are all major challenges that need urgent attention. Unfortunately, water problems are not solved by “apps”. They need intervention, community by community, at a ground level. From a social justice standpoint, people in Africa, South Asia and other emerging markets suffer the most, due to availability and quality of water factors. The UN Water Summit held in March this year, highlights some of these issues and hopefully spurs urgent action.

CWR: Going back to what you just said about how do you solve SDG6 – “clean water and sanitation for all”? Is it a lack of capital or is there another reason? Lack of management and planning? What is it and how do we fix it?

SS: SDG 6 is an important investment consideration for us. It’s a complex question without a single universal solution. As a starting point, applying the principles of conservation, reuse, recycle and responsible use of a scarce resource are all good measures. Secondly, we must realize that we are in this together – governments, private sector and us as a society. We must collectively do what we can to address these issues. “Make every drop count” is a good objective to begin with. Multiple measures are needed to address this issue by the various constituencies.

The problem is beyond capital availability rather a lack of fully understanding the issues & “Tragedy of the Commons”

We believe that while capital availability is an issue, it is not the only issue. While we are increasingly seeing capital allocated to this sector, there also is a lack of full understanding of the issues, a lack of conviction that this is an investible sector and a lack of confidence in generating returns for investors that may be holding back investments. “Tragedy of the Commons” is a factor which also impacts how we all collectively think and ignore the water problems.

We are proud to be associated with Wabag, one of the most respected companies in the water space globally involved with large infrastructure projects (STP. ETP) in emerging markets, desalination and “Namame Ganga” – cleaning of one of the largest rivers in the world. Drinkwell addresses the issue of providing safe water to smaller communities, removing arsenic and fluoride from ground water. Indra Water addresses the availability of water issue through enabling efficient recycling of industrial water for SME’s through their electro-coagulation technology. These are examples of commercially successful companies achieving meaningful SDG6 goals. A combination of capital, technology innovations, government regulations and responsible usage by all parties can cumulatively make a decisive impact to SDG6.

Another important focus area is agriculture, the biggest user of water. Countries like Israel have 99% drip irrigation, while in India drip irrigation is around 10-12%. We need to increase the land under drip irrigation. In addition, we need to think of climate-resilient agriculture, for example growing millets (as also promoted by the government), in areas of low rainfall and lower water tables.

“We never know the worth of water till the well is dry” – we must act before the “well is dry” because a problem can’t be solved when the crisis is upon us

I would say today there is a lack of awareness on water issues, particularly in urban areas, because people aren’t aware that water scarcity is an issue. There’s a famous saying by Benjamin Franklin, “We never know the worth of water till the well is dry”. We need to act before the “well is dry”, because we can’t solve a problem when the crisis is already upon us. I think there is so much focus on GHG emissions that a global focus on water isn’t given as much attention as it deserves. We need to think about the needs of 8 billion people globally throughout their lifetimes and the growth in population in the years ahead.

CWR: So, there are solutions, the question is scaling up. Is one of the reasons why we are not focused on bringing proven existing tech to market because the water space is focused on building large infrastructure vs. decentralized units? Or are we too focused on looking for “sexy” new tech rather than fixing leaking pipes and solving non-revenue water?

SS: In my mind we need to focus on both: centralized solutions for large communities and cities and decentralized solutions for smaller communities. Drinkwell provides to over 1.3 million people through community level systems in Dhaka, Assam and Madhya Pradesh. We have the ambitious goal of scaling this business to reach 100 million people in the next few years. For this, capital raising becomes an important component, and is challenging within this sector. Wabag is now a listed company driving large infrastructure projects for cities, desalination, sewage treatment and other large industrial projects. As I said, large projects and smaller community-based initiatives are both needed to address the water challenges that lie before us.

We must focus on both: centralized solutions for large communities & decentralized solutions for smaller communities

Regulations also have an important role to play in this space. The Jal Jeevan Mission, an initiative of the Indian government to centralise all decision making on water projects, is playing an active role in driving outcomes. One big initiative is the “One City, One Operator” concept, enabling long-term solutions to leaking pipes and better maintenance of large infrastructure for reducing non-revenue water. “Non-sexy” ideas and execution are needed to stop leakages and reduce non-revenue water. Even though piped water in every household globally may be a great idea, it remains unrealistic to achieve it in the short-term with capital and resource constraints. So, I think if we can find an interim solution where safe water is easily accessible, that would be a desired outcome.

Plus ‘non-sexy’ tech helps us stop leakages & reduce non-revenue water

In summary, I would say scaling up existing technologies, applying it in the right contexts, investing in new and innovative solutions, raising awareness and influencing behaviour change, would be useful in addressing these issues.

CWR: Going back to what you said about how do you get these communities to have access to water, because piping water there isn’t going to make sense. Then it goes back to centralized vs decentralized systems. There’s this idea that everything needs to be a huge project vs. having smaller decentralized systems which may make more sense.

SS: As discussed in the previous question, providing access to safe drinking water is an important universal goal set by the UN. While progress has been made, a lot more needs to be done. Achieving access to safe drinking water at an affordable price is a desirable outcome in the short term, and the piped water objective can also be concurrently progressed.

Whether the solution is a huge project or a decentralized one has to be determined by the context of a particular end goal and size of the population to be served. While implementing solutions, testing of the water is also crucial to prevent unintended consequences, like in Bangladesh in the early 1970’s, which resulted in groundwater contamination.

CWR: We think the issue is people forget that water is a very locational resource, and we must manage it that way. Every solution has to fit depending on what’s going on locally. Now on to the final question from us: what are you most worried about investing in this space and what are you most excited about?

SS: I am worried that we will run into a situation where people ignore this problem for too long, and when it becomes a serious problem people will look for overnight solutions – which don’t exist. I’m worried that the focus on water as a potential problem down the road isn’t serious enough and the efforts made by everyone involved aren’t deep enough to solve this problem in time. We must remember that we are dealing with an increasing population, increase in demand and constrained supply. I think the demand and supply mismatch is quite high and the focus on the global community needs to dial up significantly and more people need to be focused on this topic.

Overnight solutions don’t exist. However, there is a long & exciting journey ahead as we solve humanity’s core issue – water

What is exciting is that we have so much to do ahead of us. What is exciting is that we are solving humanity’s core issue, which is water, through technology innovation and scaling of solutions. Ironically, we are in the modern age of AI, which is co-existing with over a billion people who don’t have access to safe drinking water – it’s just something we have to fix. We are on this journey regardless of the challenges ahead, the time it may take, the issues we may face and the number of people joining us.

Samir is the Managing Partner at Peak Sustainability Ventures and can be reached at [email protected]

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