Why we don't invest in the so-called "water industry"

Over the past decade, venture capital interest in traditional water sectors—drinking water systems and wastewater utilities—has languished. While climate tech overall has seen explosive growth (with global VC investment reaching over $70 billion in 2022), the so-called 'water sector' remains underfunded. Water-tech startups attracted just around $1.2 billion in 2023, which was above 2019 levels but still less than 3% of total climate tech funding. Even more telling, the broader water investment landscape has seen only $347 million flow into "water-related" startups in 2023.

This so-called 'water industry' or 'water/wastewater' industry performance reflects how hard it can be to generate VC-level returns in an industry defined by slow timelines, heavy assets, and limited scalability.

Why Uptake Is Slow: The Politics, Inertia & Public Mandate

Water and wastewater utilities are hinging on essential services enshrined within public policy and human rights—think SDG 6 and access to clean water and sanitation.  Projects are routinely politicized, constrained by water rights, entitlements, cross-jurisdictional regulation, and highly risk-averse governance. Legacy infrastructure, low cost-recovery tariffs, and institutional inertia mean they rarely adopt new technologies—with innovation stifled by public accountability and budgetary caution. Even digital modernization efforts are framed more as operational upgrades than investment opportunities.

Investors would be smart to reframe 'water'

Ironically, the most compelling investment opportunities in "water" are not with the so-called water/wastewater sector (utilities and some industrial)—but within other sectors battling water-related headaches. Sectors like: Linear assets (e.g., roads, rails, pipelines), Coastal Infrastructure, Finance/insurance/real estate (FIRE), and Power Generation are all grappling with escalating water risks—flooding, drought, contamination—that threaten assets and operations. Unlike utilities, these sectors are more agile, ROI-driven, and open to deploying precision technology to manage risk. That is where true market-driven innovation around water is taking hold.

Utilities Matter — But They Don’t Define the Water Risk Market

Yes, water and wastewater utilities play an indispensable role in public health and safety. But they operate in an environment shaped by politics, bureaucracy, and long decision cycles—limiting both impact investors’ ability to realize change and financial investors’ expectations of returns. Investors seeking exposure to climate adaptation via water risk will find a better fit—and likely better performance—within the broader market beyond traditional "water infrastructure" and the so-called 'water industry'. While semantics may seem minor at first, the “water risk industry” and the “water & wastewater utility sector” are materially different—with only partial overlap in technologies and investment dynamics.