Italian asset manager forecasts deal flow to reduce water waste

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An Italian asset manager has launched plans to create a European champion in reducing water waste, as large swaths of the continent struggle with severe droughts.

Ambienta, which invests in private and listed companies with an environmental vocation, is increasing its exposure to groups whose products limit water waste. Although the war in Ukraine has put energy security at the forefront of European businesses and policymakers, the alternative asset manager has warned that water scarcity risks being overlooked.

“Seventy-one percent of the planet is made up of water, but only a small fraction is accessible and renewable,” said Nino Tronchetti Provera, founder and managing partner of Ambienta. “Already today, 10% of the world’s population does not have access to the water it needs and this figure is likely to reach 40% by 2040 if we do not make the right choices.

The group, which has €3 billion in assets under management, has recently made a series of water-related investments with the aim of creating a leading European group in the sector.

Last month it acquired Calpeda, a maker of high-tech water pumps based in northern Italy, which it plans to integrate into its water investment holding company, dubbed Wateralia. Water pumps such as those from Calpeda reduce water dispersion in businesses and households, resulting in energy and water savings.

Wateralia also includes Caprari, another family-owned Italian water pump company, in which Ambienta acquired a majority stake last year. He now plans to buy more such companies and increase his exposure to the sector.

Nearly half of mainland Europe and the UK are currently at serious risk of drought, with unusual heat waves exacerbated by low rainfall in winter, according to a study by the European Commission.

Italy is one of the worst affected countries, with the northern region experiencing its worst drought in decades.

“This is not surprising in a world where economic growth has exceeded the planet’s ability to digest pollution and produce enough resources for everyone,” Tronchetti Provera said. “We need practical solutions to traditional business models. If there are water pumps that allow industries that consume large amounts of water to save water, it is a good investment.

According to the UN, half of the world’s population could live in areas facing water scarcity by 2025.

Water has become a niche investing theme in recent years, spurred by broader interest in sustainable investing. Global investment firms such as Amundi and Fidelity have launched index-traded funds on water-related themes.

Ambienta invests through its own hedge fund and by taking stakes in public and private companies, sometimes buying them outright.

The asset manager has made more than €1 billion in revenue across 148 countries since it started investing in 2007. In 2021, earnings before interest, taxes, depreciation and amortization increased by 18% compared to compared to the previous year.

The company has invested in 54 companies across Europe, including Italy, Germany and France. These countries had many successful family businesses that needed outside investment to grow further, Tronchetti Provera said.

A former profitable company, German water-based paint maker Oskar Nolte, expanded globally after being taken over by Ambienta and is now IKEA’s Swedish paint supplier. Water-based paints are significantly less polluting than traditional solvent-based paints.

“Corporations will not solve global environmental problems by planting trees or installing solar panels on their roofs,” Tronchetti Provera said. “If you don’t update your traditional industrial processes, the market will eventually take you away.”

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