Echo River's Inaugural Impact Report

A Message from Managing Partner, Peter Yolles

2023 was marked by technological advancements that made practices imagined decades ago a reality.

Detection and removal of water quality contaminants improved from parts per million (ppm) to parts per trillion (ppt), enabling unprecedented potential to remove per- and polyfluoroalkyl substances (PFAS) from drinking water that has led to public health concerns.

For the first time since reverse osmosis filtration was invented nearly five decades ago, the use of smart, digital membranes promised new methods for effective desalination, bringing our goal of producing decentralized freshwater at scale within reach.

Advancements in AI and machine learning expedited efforts to digitize the water cycle and, in turn, provided data required for effective and predictive water management and a deeper understanding of water cycles in nature.*

Beyond technological advancements, both industry and governmental leaders have responded to water’s relationship to climate change and made commitments to mitigate and adapt to global changes.

Tech giants like IBM, Microsoft, and Amazon set new water-positive targets like reducing and replenishing water usage for cooling data centers. The Klamath River dam removal project was designed to improve water quality, increase biodiversity, and protect tribal cultural and ecological heritage. Significant progress continued stemming from the Inflation Reduction Act and Bipartisan Infrastructure Law, which marked the largest water-related investments in American history with $50 billion allocated to upgrading water infrastructure in the U.S.

Even with this progress, 2023 served as a sobering reminder of the increasingly urgent global climate challenges. ERC is responding by deploying capital with the necessary pace, scale, and compassion to achieve water and climate resiliency for both people and nature.

Challenges

Despite the emergence of new technologies, problems of having too much water from increasing rainfall and flooding or too little water from droughts and water scarcity persists. This reality can be traced across the globe. Pakistan, Bangladesh, and Dubai suffered from unpredictable monsoons and deluges. U.S. cities like Flint, Jackson, Buffalo, and Houston faced barriers to accessing safe drinking water and mitigating flooding from deluges.

No matter how many band-aid solutions are provided, until there is greater private and public investment in innovation, headlines will feature catastrophes instead of abundance.

Solutions are apparent, so where is the change? At ERC, demonstrating change through impact is the best way to contribute to creating the evidence that will drive enduring, consistent improvement. The evidence will overcome risk aversion and hesitation from fully adopting new technologies that lead to new ways of working. It’s time to move beyond endlessly piloting proven technologies and to embrace the notion of continuous and iterative improvements.

What needs to happen? Climate-driven investors should accelerate investment in water tech to be proportional with its potential impact. Today, water tech accounts for 1-2% of climate investments despite being responsible for 10% of global GHGs and 70% of climate change’s insurable effects.

We are optimistic that this will happen based on interest we’ve seen and evidence from Morgan Stanley’s 2024 investment report, which found that individual investors now rank “water solutions” at the top of sustainability areas in the EU and U.S.

Moving Downstream

Many portfolio companies are focused on strengthening their product-market fit and scaling adoption in their respective markets. ERC is backing these teams with increased investment in adapting to the effects of climate change and mitigating emissions driving climate warming. This requires extensive knowledge of the sources of carbon emissions in the water cycle, a willingness from the private sector to “de-water” business practices, and an embrace of “the innovation economy.”

ERC is proud and honored to invest in founders who have the ambition and skills needed to create solutions for a new water-critical economy. It is also thankful for a passionate community of advisors, LPs, co-investors, and fellow water enthusiasts.

Sincerely,

Peter Yolles, Echo River Capital Founder & Managing Partner

ERC is making the reporting methodology available to other funds without charge. Please reach out to impact@echorivercap.com for access to a guide and templates to enable your fund to report on your impact.