Could Water Markets Save the West? Q&A with Margaret Bowman on Impact Investing

July 05, 2016 | Water in the West | Insights

Shannon Swanson

California has been in a serious drought for years and its consequences are mounting from increased fires to lower water tables. With no end in sight, Margaret Bowman, former Deputy Director of the Environment Program at the Walton Family Foundation and now principal of her own environmental consulting firm, is looking to water-focused impact investing as a possible way forward.

Recently she gave a talk entitled Using Private Capital to Drive Water Sustainability Solutions as part of the Stanford Woods Institute’s Environmental Forum speaker series. Bowman was quick to point out that she is not a finance expert, but rather “a lawyer by training and policy wonk by practice.”

We followed up with her after the talk to discuss her latest projects.

After working in the non-profit realm, what motivated you to open your own environmental consulting firm?

I had been working in the philanthropic field for over a decade and wanted to take a break from the engaging and interesting—but also isolating—world of philanthropy. I also was excited to help develop the field of water-focused impact investing. I think we are at a compelling moment in time where we could help change how water is managed across the west by bringing investors to creative water deals.

You mentioned that it is possible to build water markets so that they are compatible with environmental interests. Can you elaborate?

In most places, there is enough water to meet human and ecological needs so long as we manage the water we have wisely. I believe that development of water markets that enable water users to share water in a flexible and environmentally sensitive fashion can not only reward water users for efficient practices but also protect and enhance environmental resources. For example, a water bank can be established to store saved water and lease or sell water to other users.

You told a story about a farmer in Colorado, who tried to convince his colleagues that bucking traditional water management to support water leasing models was a smart move but he was unsuccessful. How can water conservationists better navigate tradition and interpersonal conflict?

A lot of mistrust among varying interests resulted in the unfortunate story I told. I believe that engaging in specific deals with farmers that enable them to maintain their profitability while saving water will help build trust.

You spoke of four pipelines that are in the works to achieve more effective water management and financing. What are they and which do you find most promising?

Of the nine deal designs outlined in the October 2015 research report Liquid Assets: Investing for Impact in the Colorado River Basin, by Encourage Capital and Squire Patton Boggs, I am helping to develop four with a team of partners. These include: agricultural and ranchland investment, where we are using land purchases or joint ventures to improve profitability and generate marketable water; innovative municipal financing, where we are designing green bonds and environmental impact bonds to finance natural municipal water solutions; community water trusts, where we are deploying investor capital at the river-basin scale in a financially self-sustaining fashion; and lastly, forest resilience bonds, where we are reducing fire risks in watersheds through pay-for-performance bonds.

We picked these four because they were the most ripe and promising for investment. I don’t think one is necessarily more promising than the other—they all need an investment of time and resources to originate and design pilot deals.

If there was one thing you wish people knew about water conservation and financing what would it be?

That there is real interest from the private sector in investing in deals that have both a water supply and environmental benefit—the limiting factor right now is designing those deals in an investable fashion.

What is the most impactful action concerned citizens can take to address water shortage issues?

At the risk of cheating and giving two, the first thing people can do is change their yard to local drought tolerant plants. This saves water and it’s better for the local wildlife. The second thing is to think twice about eating meat. Meat production uses a ton of water. The largest factor in determining what size of a personal water footprint you have is how many of your meals in a week include meat. You don’t have to become a vegan, just reduce the number of meals with meat.

It sounds like you have many interesting projects on the horizon. Which project excites you the most and why?

I’m really excited about partnering with farmers in switching to crops that use less water. I think there is a real win-win opportunity in many regions across the west using this strategy.