How to Admit, Value, and actually Overcome the Economic Risk of Water

Water may well represent less than 1% of the World’s GDP, but it heavily affects the other 99%, turning it into a major economic risk.

Why and How? Let’s review!

with 🎙️ Nicola Lei Ravello – Author and Founder of White Stag Investing

💧 White Stag Investing is a research platform for responsible investments, focusing on sustainability as a source of value and stability in the long term.

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What we covered:

🌎 How the interaction between Water and the World as we know it relies on a fragile equilibrium

🚰 How our whole economy builds upon a steady supply of water and how it could turn into an economic risk if it was to get disrupted

🌊 How with Climate Change unfortunately here to stay, events of too little or too much water will multiply and what it involves

⏰ How the acknowledgment of the economic risk of water is still embryonic and how stakeholders and decision makers may click too late

💸 How mitigating the economic risk of water is fully doable, yet can be quite expensive

📊 Why market forces can play their role to better value water and how

📈 How we rely on probabilities and data to engineer our infrastructure as well as our financial portfolios and how the new unknowns create a new wave of risks

🌱 How the world’s economic risk is also a business opportunity for the Water Industry – and what we shall do to leverage it

5️⃣ How there are five shades of investing in sustainability and what they are

🔁 How ESG approaches change the way many finance players do their job

🔥 How humanity has built its wealth around water in all its forms and how that may soon backfire

🤖 How new technologies can have an effect at a planetary scale and what it involves in our approaches to it

🛥️ How there’s a relationship between building a ship and crossing the Atlantic as a Viking and modern investment approaches

⚠️ Industries that are the most exposed to water risks, the available tools to measure it, the finance scene rapidly evolving, water wars and manufacturing peace, water from an indigenous perspective, making balanced investment decisions in an uncertain world, writing, educating… and much more!

🔥 … and of course, we concluded with the 𝙧𝙖𝙥𝙞𝙙 𝙛𝙞𝙧𝙚 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 🔥 

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Resources:

➡️ Send your warm regards to Nicola on LinkedIn

➡️ Visit White Stag Investing’s Website

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Teaser: Water is an Economic Risk

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Infographic: Water is an Economic Risk

Infographic-Nicola-Lei-Ravello-White-Stag-Investing-Water-is-an-Economic-Risk

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Full Transcript:

These are computer-generated, so expect some typos 🙂

Antoine Walter: Hi, Nicola. Welcome back to the show.

Nicola Lei Ravello: Thank you very much. Thank you for the invitation.

Antoine Walter: So you’re one of this twice guest on that podcast. There’s only one ahead of you it’s Ravid Levy, who was there three times. So now you have some pressure.

Nicola Lei Ravello: Yeah, sure. I can come back next year too. You

Antoine Walter: I recap a bit what we discussed last time, but just before I’d like to open with our good tradition, which is the postcard.

Yeah. And actually we are sending a postcard together from Zurich because we sit in one of these fancy places, but what can you tell me about Zurich, which I would still ignore by now?

Nicola Lei Ravello: it’s very sunny day today. We get lucky and we got super lucky, I would say also over the winter to have a lot of sun.

Antoine Walter: So sunny Zurich. That was our advice as the tourist office.

Nicola Lei Ravello: Yeah. Now, but I would say that Zurich is really a city where it changes a lot by by the season, like in winter, everyone is a bit inside having maybe a beer or a glass of wine inside, but as soon as the sun comes around, like, It’s like the city flourish, like a flower, like there’s like terraces everywhere.

You can go in the water. It’s like, there’s a lot life in it. Yeah.

Antoine Walter: there’s a terrace here. Yeah. I was thinking maybe let’s do it outside, but I think you already have some background now from our place.

So maybe outside, would’ve been a bit,

Nicola Lei Ravello: yeah, we can get the coffee afterwards or be

Antoine Walter: So when we discussed roughly one year ago on that microphone, you showed us how finance could unlock something in the water sector. And I think that’s quote unquote, what you said finance can unlock something. And how that was good news because there’s this element of finance can be maybe something that people are afraid of.

 You expand how different investor profiles would see different appealing aspects in the scattered water industry from the utility bedrock that makes for a safe bed for pension funds up to the dynamic startup scene, that’s attractive for venture capital . And you’ve told us how that made finance a kind of engineering space where investment research and consulting companies like White Stag your company can build sustainable portfolios in all the acceptions of sustainability.

So hopefully profitable, but also with a positive social and environmental impact. And you see how I put profitable first? Yeah. Which is already a question. Shall we put profitable first or the impact first?

Nicola Lei Ravello: I think it really depends what you wanna do, mean, if you’re an investor

You want to make a change and an impact, then you can put the impact first, it really depends a bit of the. The owner of the capital and what he really wants to do, you can be a family offices that is a bit more conservative and just cares about the wealth of your family over time.

And then you put like the financial first, but you can also have, maybe want to have an impact on the side, you know, pension funds. They need to care about the financial, because otherwise they’re not gonna be able to pay the liabilities to the people, but, they still have a pressure from their constituents to have an impact, yeah. I mean, it really depends of the capital owner and what you want to do, I mean, you can be like also a family emphasis or a VC fund that really cares about solving water issues and you go on the impact full on. Yeah.

Antoine Walter: actually I warned you last time. I have to warn you again this time. Yeah. Of the fact that I’m really a finance layman and I’m happy being a finance layman. So I’m trying to simplify things

Nicola Lei Ravello: Yeah

Antoine Walter: I get them. And in that preparation, I was looking bit how big is, impact, how big is NG ESG.

And And so far, and from what I’ve found, ESG investments is about 15% of the investments worldwide, which would make about 35 trillion. If I’m right and inside this ESG one percent is impact and that would make about 350 billion.

I had the discussion with John Robinson on that microphone.

And when I said that he told me no, that is over simplification. That’s not how he would define the general pockets in the market. So would you agree with this?

Nicola Lei Ravello: I mean, I don’t look at the latest numbers. I think it’s roughly that, maybe a bit, it was even a bit more actually maybe 1.5 billion for impact and. I’d say 40% for ESG, but I think it’s right in a sense that I mean, ESG is a lot of different things, when you design your investment strategy and how do you want to integrate sustainability? There’s a thousand ways to do it, so you can either start with the basic screening methodologies. You say, okay, we don’t invest at all in in guns, in oil and gas, in the mining operation.

That’s one way to do it. Or you say, okay, we have an engagement methodology. So we engage with the oil and gas industry trying to reduce their externalities, their methane pollutions the problem, all the problem linked to fracking and everything. So you can also have an impact by engaging with your companies and saying, you should not do that to this?

Or you can have like a, I would say, a targeted approach where you say, okay, we. we really believe that climate change or the water crisis is a huge problem. And the solution for these problems are gonna be needed and are gonna be valuable in their own. Right. And you can just target the best solutions and create a portfolio out of this, so yeah, I mean, I would say the ESG wave is it’s quite massive. And I think it will take

Antoine Walter: talking of that E ESG wave because when we discussed one year ago, it was about, is there sufficient finance due to feed the water industry? And we’re saying you were explaining that finance can unlock something, but we are also saying maybe finance is not yet to that point.

And you were saying, you have to evangelize and to keep explaining everyone. And now we have the

Nicola Lei Ravello: did I say evangelize?

Antoine Walter: I think that was my oversimplification.

Nicola Lei Ravello: maybe . Yeah,

Antoine Walter: but when we see now the ESG wave, everybody keeps referring to nowadays. Do you think that went too far and is it a bubble?

Nicola Lei Ravello: Well I think I would say first that there’s definitely a lot of interest from retail investors. So like, you, me and like personal, I mean, I would say not ultra wealthy people to that really care about like sustainable challenges, like solving climate change, solving water.

So there’s definitely an interest for this. And also from also some family offices or ultra high networks, or very rich families, they want to have an impact, and then it’s like, how do you translate that in tangible projects, genuine in financial products that does have an impact, and I think that’s the whole that’s whole deal now. So I would say the ESG wave has a change in investment preferences. So not only care about financial return, but also about the impact. I think that’s pretty good. And that’s gonna change the industry. Cause now you, you design your investment strategy, not only about risk and return, but on a third dimension, and then I think it’s gonna be a process of be going too far going.

Coming in, but at the end of the day, I think what matters is whether your investment strategy is legit, like if you really have an investment process that cares about impact that you do either an engagement methodology, or you do a specific targeting of the best solution. there’s also a dark side where a lot of asset manager use that as a tool to raise more assets, and or just surfing this greenwashing wave,

Antoine Walter: When you say investment methodology and. ESG really, from my perspective sounds sometimes a bit blurry. You can have your own definition of E of S of G and then define it to be really green or really sustainable, or really having an impact when in fact objectively, maybe it’s not really the case.

Nicola Lei Ravello: hundred percent.

So

Antoine Walter: Is there a structured way to build an ESG portfolio?

Nicola Lei Ravello: Yeah. Yeah. I mean, I think that’s the whole deal, this whole exercise, it’s like it’s like rebuilding a car, with a new changing Euro gas engine to to electric engine.

So somehow you have to. Remove the engine, you have to change all the things and put a new engine and make sure that everything still works. So you had an investment process where, before, I don’t know you were caring about volatility. We don’t invest in stock that are too risky or too volatile.

We want to target return between, I don’t know, fear five and 15 and that’s it. Now you have like a third dimension, like now we also want to impact or at least sustainable I would say sustainable consideration, so kind change the parameters in your modelization in your in your analysis.

So

Antoine Walter: yet if I recall my discussion with Claudia Winkler and Alice Schmidt on that microphone, in their sustainability puzzle book, they explain how we have this Mickey mouse thinking where you have profit is the head of Mikay.

And then you have environment and Ty, which are the ears of Mikay. So they exist. They are parts of the assessments, but they are by far not central, like profit would be.

Nicola Lei Ravello: Yeah. I mean, that’s, that can be that can be one way to, to approach it, well, I mean,

Antoine Walter: them, that was the wrong approach but the approach that too many people keep following.

Nicola Lei Ravello: Yeah. I think the financial is still the main consideration for a lot of investors, I wrote an article, I think two years ago about why people care about sustainability, so I think the first level is like, oh, you see that as a well, people care about sustainability. I can just put some words in my in my fact sheet that are sustainable and I can raise assets from sustainable investors, so that’s kind of like a using sustainability as a marketing tool. Even if you don’t give. Give a dime about it and you say, oh, that’s I can increase my 10%. That’s one way. I mean, that’s like the greenwashing way, that comes at your own risk, because if you say that you do sustainability, then you don’t, and then maybe those clients they’re gonna come back and then it’s like, reputation issue,

Antoine Walter: so kind of greenwashing at that

Nicola Lei Ravello: stage. Yeah. I mean, that’s pure greenwashing, and some people can use it as a way to make money, but if you do that, you’re just gonna be a risk. It’s like being dishonest,

Antoine Walter: like

Nicola Lei Ravello: This is just simply not true.

Antoine Walter: mm-hmm

Nicola Lei Ravello: You have other investors that see sustainability as a compliance, so they have the traditional financial investments, and now like they have this pressure from society or from the investors to care about sustainability.

So they kinda see, oh, we have to deal with sustainability. So how can we do that? So those kind of investors, usually they’re gonna rely on frameworks, on ratings in a way to justify their investment, so they do like simple screening. Okay. So

we’re just gonna tick this box and that’s okay. So sustainability is deal is dealt with, and that’s very, really a compliance Then you have more sophisticated investors that see that as a economic risk. Sustainable issues are changing the world entering the economy.

And if you don’t take care of them, you might lose your investments, so you have to integrate those consideration, your risk management process, then two other layers is like, they see that as an opportunity. So that’s the other side of the risk the risk discussion and they see new opportunities investing in water tech, climate tech, or all the kind of solutions they’re gonna solve

Global issues.

And I would say the last is people that really care about the impact they invest for impact,

Antoine Walter: the, this third level of risk I think is the heart of your latest articles.

So I think it’s also what I’d like to

Nicola Lei Ravello: discuss. Yeah. A hundred percent. Yeah.

Antoine Walter: J just before we go into that,

in this ESG wave. Yeah. I had Reinhard Hübner on that microphone explaining that. To quote him not to,

Nicola Lei Ravello: yeah, sure.

Antoine Walter: his word there’s too much stupid money chasing too few good targets.

So that would mean ESG is full of investors, looking for companies to invest in. And they’re not that much good companies, something which Christopher Gasson said in different words, also on that microphone when he said that we should not complain about the ESG wave at all, but we should make sure that there are projects for that money to be efficient.

Nicola Lei Ravello: percent. Yeah. Hundred percent.

 I definitely think in the public equities water funds, like the lack of Pictet or RobecoSAM, when Pictet is managing almost 10 billion now in investing in water stocks RobeccoSAM 4 million and there’s have been a lot of interest and a lot of money going there, I think there’s definitely a lot of too much capital for the number of water companies then there exist.

And that’s why I think a lot of them at a higher lot of, I would say high valuation but I think this is also due to the fact that you had a lot of liquidity on markets over the last 10 years from the quantitative hazing from the central banks. So the central banks were pulling a lot of money, they were like expanding the monetary mass in the market to support the economy and support job growth and support the whole economy going, and that’s this kind of If you expand the pool of money you are, you run the economic risk of inflation, and usually inflation is in, in the economy.

But I think in the last 10 years there were in asset

prices, I mean, if you look at the market, since the financial crisis, it was almost like this, like almost like a straight line up, so I think the high valuation we see at least in the public equity water market is not because of the water not only, but also because of market factor, that valuation were in generally high, because there was a lot of liquidity in the market, so yeah, it’s gonna be interesting to see how it’s gonna develop now that , the economic inflation is high that

Probably banks gonna start raising rates. So they’re gonna like pull back the money. So when there’s less money in the economy, the valuation is gonna go down because people are just have less.

So I think it’s gonna be interesting to see how things gonna normalize. And I think that’s also gonna impact the private equity and the venture capital, because there’s also gonna be less money. So the valuation will probably go down a bit. But that being said, I still think that the.

 Fundamental reason to invest in water is still here. we need those solutions. climate change is gonna aggravate the whole water crisis. We’re gonna need solution to deal with water scarcity around the globe with floods. And so that’s not going away,

Antoine Walter: actually those are some of the risks which you list in your article.

Yeah. And your article is if you read it, I mean, out of the blue, yeah. You just start reading your article and like, oh my God. Water is really troublesome because there is the floods. There is the risk. If you don’t have water, then your industry’s done because it’s on the critical path and you list all those risks and. What is your intention with that? Is it to scare people and say, look there, there’s a big problem.

Nicola Lei Ravello: Yeah. I don’t know if I’m in to be a scarecrow or but I think something I was not seeing in the sustainable space or in investment space. I think something people invested definitely don’t realize is how whole economy is working because we have a steady supply with water.

I mean, I think that’s the foundation of society, since the last ice age, humanity can develop itself around the water lines, around rivers, around the lakes, around fresh water sources, slowly but surely we we build agriculture practice that was using this water.

Then the water was used as a way for commerce, and then you, and in the last 200 years, it was used as a industrial input, I mean, you need water to factor medicines, drugs, you need water to create cement for clothes for for pretty much anything actually. And if you used to unlimited and free supply water and you don’t even realize it’s part of your business model, because for forever you lie, I’m just gonna take the water from the lake.

I mean, now. There is a drought and there’s no water available, then you start realizing, oh, okay. It’s like, yeah, we need to do something about that. You know?

Antoine Walter: So you’re saying that water has a huge value, which we don’t realize because we have it.

Nicola Lei Ravello: a hundred percent. Yeah.

Antoine Walter: it’s kind of thing, which if it vanishes and disappears, then all of a sudden we’re like, oh yeah, that was really at the core of everything.

Nicola Lei Ravello: I mean, I think most of the industrial business models in modern time, they rely on a free and steady supply of water, and this is going away. So if they don’t do something about it, then you might find yourself in a tough position. And that’s kind of what the message I wanted to get across, that pretty much all industries and all investments, I mean the whole business and the whole valuation relies on this process to have a water, to

To produce and to function.

And if this water goes away then your investment or your business is at risk,

Antoine Walter: And to whom do you want that message to come across?

Nicola Lei Ravello: I would say the entire financial community and the economic community. I mean, pretty much anyone, actually. I think it’s really also part

Antoine Walter: your primary target if there’s really

Nicola Lei Ravello: primary target is really the asset managers, investors, and and the financial community. And that’s kinda, I would say my way of having impact, if I can do my part in showing in valuing water in financial market and in the economy, then the whole idea is that once investors and asset managers and economic decision makers know the real value of water, they’re gonna change the decision about water and they’re gonna start preserving it, so it’s really using market forces to to value water.

And once it valued a LA, we cannot follow it. We cannot disregard it. Then somehow the whole economic machine Starts to protect it.

Antoine Walter: So an asset manager reads your article and reads one of the scary stories inside, like, like the semiconductors in Taiwan, all of a sudden, no water, which means you stop producing because yeah. There’s no other way around.

There’s no water. Yeah. And so how does he react to that? You say it’ll influence their ways to look at water, but in concrete step, will they, I mean, they are still asset managers. They are not people which are Reiding with the waters, which read their money, which is gonna, so it’s an indirect impact

Nicola Lei Ravello: yeah. It’s it is an indirect. I mean, my feelings at the moment is that it’s the whole sustainability story. I think people, I think now there’s a realization in the financial system, in the financial community that sustainability climate change and the water crisis and biodiversity is.

Important and defines the survivability of the economy, so I think there’s this realization that without that we don’t have an economy, we don’t have money. I mean, the survivability of an asset manager is dependent on nature, keep on being healthy and working, but then it’s a bit like a decision, like, should we change everything we’ve been doing to make it more suitable now, should we wait a bit what the others are doing?

And there’s a bit like a process on, and I think there’s also like, some asset manager can stay invested in oil, because I like to use a baseball analogy for this. Like, this is the LA the last innings, the last L 12 11 or 12, but it still can be a lot of activity that, and so I think some manager asset manager can start investing in new system or solution and be at the same.

Still being invest in oil gas, because they can still make the last pocket of money that is exploitable in these things. So, an asset manager can approach the transition, like the whole coming from a business as usual investment practice to sustainable investment practice in a way that is not necessarily the, what would be ideal from a climate perspective,

Antoine Walter: so if you help them click and realize a bit earlier, you’re shifting the timeline because that’s something they would have done.

Nicola Lei Ravello: Yeah. I mean, that’s really what I’m trying to do. And I think that’s really what I see. It’s really a switch, because I’m always trying to put water as as a culprit.

I dunno if it is the right word in English, as a how the entire investment thesis relies on this, and once, once I make this case, People it’s like less, really like a switch, and then they understand perfectly and they have an idea to where to start what to do, and I think that’s kind of all the articles I’ve been writing for the last year. It’s so about this, it’s like, I mean, it’s like Tesla that has been investing 5 billion in its Brandenburg factory to, which is seen by by most analysts as the its way to dominate the European market to at least grow its presence in the European market.

But the reality is that the groundwater reserves in Brandenburg are going down, so Tesla like at the license from the environmental office of the Brandenburg state, but then office got sued by the local farmers and communities, and somehow now it’s, legal legal gridlock, and the lie is stuck, so it’s this it’s entire success of its new investments depends on whether you’re gonna get water or not, I think,

Antoine Walter: which is a very, let’s say funny, it’s not the right term, but a funny story, because actually you can solve that in the case of Tesla with creating the biggest atmospheric water generator ever.

Which is a story I like to cover on that podcast, which has lots of ins and outs, but it sounds like, you’re just raising the financial bar of the value of water. And at a certain point, it crosses the line of how much it costs to create water from air. And then you do water from air and it can sound like there’s a solution to everything.

And usually that’s the way we treat desination. I mean, you don’t have water, just desalinate water, and there’s oceans everywhere. So you find water. And on the other hand, it could be just shifting the problem because. What happens to the climate. If all of a sudden you start to really use all the humidity to, to produce batteries and nobody knows, and maybe nothing, but still, nobody knows.

So

Nicola Lei Ravello: That’s a good question. I mean, when I looked at the technology, that was one of my main concern, you’re still altering the water cycle, in a way that is not known, I mean, you can do ever mental modeling and reports to have an idea of what’s gonna impact, but who knows, my, the same way it’s gonna also, I mean, water vapor is also a greenhouse gas, so

Antoine Walter: the strongest of all,

Nicola Lei Ravello: Yeah. The strongest fall. Exactly. So it can also be a way to reduce, to work as a climate mitigator,

Antoine Walter: It’s the greenest way. Just we don’t know.

Nicola Lei Ravello: Yeah. And that’s, I mean, that’s, I think we are really entering in an era where where’s a lot of unknown, like many technology.

I think I was also skeptical about all this carbon removal from there, like what happens when you start messing with the carbon cycles? The water, I mean, I’m not a climate scientist, I understood that so far that the carbon is like

You unified in the, around the planet.

So that’s somewhat okay. And but I think a lot of new technologies now is gonna be at a planetary scale. That’s changed the planetary systems, and then sooner or later, we’re gonna have to understand really how that works and make sure that we don’t screw it up.

Antoine Walter: You say there are a lot of unknowns and I think you’re fully right with that for.

A financial professional. That sounds like, like the worst, which can happen because if you have to make bets on the future and safe investments and everything, I mean, unknown and risk is not really what you have at the hurt. And if you look at the pyramid we had last time we were discussing with the bedrock, the people which are looking for safe bets.

And then on the top of that pyramid, the venture capitalists, which can absolutely deal with economic risk. It sounds like those guys are now in the middle of their environment everywhere, but the ones which are looking for very safe investment, what is safe in the new real

Nicola Lei Ravello: question. I mean, there’s usually an analogy that’s when you build an investment portfolio or your bank account, you see that as a vault, that you I’m just gonna create something safe under underground and with thousand walls and that’s safe, but if you build that and there’s a flooding and then maybe all the, all your bank notes in the vote

Antoine Walter: are.

Nicola Lei Ravello: Are getting water, then the whole reserve is gone,

Antoine Walter: so

Nicola Lei Ravello: I think a good analogy to see investments is also more about like, you like building a ship, like you’re building an investment process, It’s like building a ship and trying to cross the Atlantic like Vikings before or Europeans in the 16 and see where that goes.

But I think dealing with UNS, uncertainty, and and risk is probably the job of asset managers, ,

Antoine Walter: but when you look at

I don’t know how to call them. Let’s say the finance community. Yeah. Do you see many people which have the same approach than you and which try to go to the bottom of things and to understand them and hence yeah. Have informed view and know where to put their eggs and which baskets are the safest or do they rely on people like you to indicate them the trends and where are those baskets if they’re maybe hidden

Nicola Lei Ravello: Yeah. I mean, that’s really what, how I see my job, is being informing the, how the.

Antoine Walter: the

Nicola Lei Ravello: Investment consideration are changing with climate change and the water scarcity issues and and biodiversity, so then it’s re up to every investors, some, they don’t really wanna know they don’t care and they’re just gonna invest their money.

Others really see that as a risk and opportunity. So they’re gonna change their decision. Okay. We’re not gonna invest in this anymore, but we’re gonna invest in that. No, I definitely see a lot of managers that sees sustainability as an opportunity. Now, I think the likes of BlackRock the main ones they understand, I think that we need to change society now.

I mean, the way it’s built is not aligned with nature anymore, so that’s not gonna work. And in this change, it’s like rebuilding society, you know? I mean, it is huge opportunity for people that can see that want to see them, it’s like rebuilding entire infrastructure, the entire cities, the entire way the economy is built.

And if you finance the right solution, then it’s like,

Antoine Walter: But that, that starts with awareness. And there’s one quote for, from you, which you say that, that water represents less than one percent of GDP, yet it influences over 99% of

Nicola Lei Ravello: GDP. Yeah. A hundred percent.

Antoine Walter: And once you’ve been looking at the water industry at the water sector or industry in general and the role of water into that’s absolutely clear.

And that sounds even obvious. Yeah. But you know what? It’s like the ha effect.

Nicola Lei Ravello: A hundred percent.

Antoine Walter: before you break the ha

Nicola Lei Ravello: yeah.

Antoine Walter: You just don’t realize

Nicola Lei Ravello: that. No.

Antoine Walter: And what is the level of awareness you see out there when you say that are people saying, oh God, we all know that, or

Nicola Lei Ravello: On water, I see. Little and that’s my job.

Actually. I see that it’s like really I would say an awareness and education process by an older post and articles I write on a daily basis, and I feel it’s clicking in, so more and more, there’s more and more engagement with my post and conversation that they understand, like, and that’s what I’m trying to do always is like treat going for this switch.

It’s like, look, I mean, we have an economy because we have a steady supply of water, and if that goes away, then it’s like energy actually is the same. I mean, if you’re trying to run a business without electricity, I mean, it’s,

Antoine Walter: there were electrical blackouts, so people realized that. Yeah. it’s a bit The doom of the water sector is that most of countries and most of places, except for the one which lived the zero or the one, which really liked Taiwan, one

Nicola Lei Ravello: had to

Antoine Walter: to shut down their semiconductor industry.

They just never had the problem. Yeah. And probably when you have the problem, it’s already too late, so you have to react before.

Nicola Lei Ravello: Yeah. And that makes the risks more pernicious, I mean, as you said in electricity, when there was a blackout, oh, you understand that we need a reliable social energy, but in water it’s more like, I mean, that’s a good question now. Like how do you invest going forward based on water and climate risks that you don’t really know?

I mean, you can read the IPCC report. They say they have several level of confidence, like, floods are gonna increase by this droughts are gonna be increased by that, but you don’t re, you don’t really have, I mean, you an engineer, like how do you plan this kinda water resilience going forward?

There’s a lot of, you can say, oh, maybe we wait another three, four or five years, see how it happens. So should we go with the big buffer, should we aim for like four degrees world and build like, Strong resilience thing or is something in between. And I think that’s not an easy decision.

No, absolutely.

Antoine Walter: I mean, in the engineering world, there’s a bit this element of, historically our infrastructure was built on probability. Like there’s one out of 1000 changes or risks that, that this happens. And hence we build our dams, our I mean the full hydraulic infrastructure on that.

And now we have a shift and the shift means that probably the events are gonna be bigger, but we don’t have data. So it’s like, let’s take a guesstimate.

Nicola Lei Ravello: Yeah. and

Antoine Walter: say we mention everything because we still have to have this one out of 1000 probability because people won’t accept to be flooded every second year, but we just don’t have data.

We know something is shifting, but what we don’t have that historical track record anymore when we can rebuild upon it. And that is challenging because that is,

Nicola Lei Ravello: yeah. I mean, I think you understand, well, it’s like you build your infrastructure based on a set of probabilities. So you create a buffer for the uncertainty. Now there S uncertainty, none, these priorities are changing, but you don’t know how they’re changing, and how much, so the buffer, you need to adjust the buffer, and it’s tough.

I think it’s gonna be a decision going forward. Like how much you invest for this buffer how much the buffer should be now for, to account for climate change. We didn’t have, like this blackout that put the awareness on the map, but I think now it’s a couple of examples that happen with Tesla with other actually

Antoine Walter: actually the interesting thing is that probably if you look at the economic risk side of things yeah. The blackout wouldn’t be the biggest risk though.

That’s my very subjective feeling. Yeah. Because if you don’t have water, yes. Everything is stopped. Yeah. But as soon as you can find a new source of water and we are very imaginative. Yeah. You’ll find you, you correct the thing, but the other extreme, which we’ve seen in Europe not that far ago and in the us, not that Fargo as well is when.

All of a sudden, far too much water. I mean, floods,

Nicola Lei Ravello: hundred percent.

Antoine Walter: all these cl events, which we will, we all feel we will see them more, but react to those is much more difficult because you cannot just press a button and have less and have a technology which just vaporizes that and send it button to the atmosphere.

I Reverse atmo rate, quarter generation like cloud generation.

Nicola Lei Ravello: no, you need to build new resilient infrastructure. Like either pumps to storm. I mean, these are a whole entire storm water infrastructure that needs, that has to be built.

Antoine Walter: in terms of capital that’s a fully different scale. Yeah. I mean, there you are.

I mean, when you’re building something to. Desalinate a bit more water or gets atmospheric for generation. It has a fixed cost, which you can calculate and estimate, and it’s gonna be in use. And on the other hand, flood prevention is something which is very captive, intensive, and might be absolutely not used for 10 or 20 years.

Nicola Lei Ravello: Yeah, exactly. But if you didn’t do it and in 25 years, there’s a massive flood on you. on the water. Some

Antoine Walter: On the water. So, but, but the, this assessing the financial, I mean there, the risk and financial link is absolutely clear because you have to be, I mean, that’s money, which you’re gonna, you’re just gonna invest in, in some concrete, in some stones.

And once it’s there it’s blocked for centuries. So that is a difficult equation to solve on the

Nicola Lei Ravello: percent. Yeah. But I think the first step is really to get that awareness.

If if I can aim for this and succeed, that’s really, I think, a big step. And that’s also the whole process of valuing water, whether too much or too little. And you’re

Antoine Walter: you have that quote, which is that carbon is not all the story in sustainability and water has a direct and natural impact on businesses. Bottom lines and therefore you invest in strategy and you think that water will become a new standard of ESG integration going forward as institutions grasped with the physical reality of climate change.

Nicola Lei Ravello: Yeah.

Antoine Walter: Which is exactly what we discussed. But I have now a very broad question, sorry for that. But how

Nicola Lei Ravello: I would say how not

Antoine Walter: that was an easy one. look, I

Nicola Lei Ravello: I think I think most of the sustainability discussion and ESG discussion was asked around carbon so far, because I mean, we need to mitigate emissions, otherwise climate change, gonna keep on increasing and getting worse, so that’s crafting carbon is the whole climate mitigation story, but at the same time, we’re already at a point that is. We already suffering, or we already have to deal with the effect of climate change so

Antoine Walter: so far,

Nicola Lei Ravello: and that’s gonna be the adaptation story, and I think the adaptation story is gonna base around water, because most of the effect of climate change has somewhat linked to to either too much or too little water, so droughts storms, sea level rise.

Climate change is disturbing the water cycles. So disturb the water security we have, and then we need to rebuild the infrastructure and the solution to make sure that

Antoine Walter: But how do you build an indicator for that for water inside and ESG framework?

Nicola Lei Ravello: a great, that’s that’s a great question.

And there was one of my my work within a private bank last year is like, how do you go from an investment process that is business as usual. So like traditional to one that cares about climate and water economic risk, so my idea was like, okay, you look where you invested the most. And you, yeah. You have tools in the in the industry to tell you what are the water risk, how important they are to a given industry.

And you can use that to to start modifying your investment process. So my, my idea was like, okay, we look at the most, the industry that are most at risk with water that’s can be oil and gas for the availability of water to frack, again, mining a lot. I mean, mining leads the water to, to mine as well.

So you need you you’re dependent on the water supply, but you can have issues with water pollutions, with putting all the chemicals you use for mining down by the river, but you also vulnerable to to floods, so if there’s a big flood, then your mine is on the water and then it’s also a problem, so my work was ready to redesign the investment process by. Creating an engagement methodology. So let’s say we have all over our investments. And we are gonna start engaging with all the companies and the industries that have the high water risk, and say, okay, you go to them and say, I mean, are you aware of this first?

Are you aware that you’re vulnerable to floods and draws? If not, you try to make them aware. If they don’t want to get aware, then you start an escalation process. You engage with the management. If the management doesn’t want to engage, then you go with the board and if they don’t want, then you just, okay, let’s let is fly, and and then you can start designing a new engagement process. Whereby you ask your companies, your investments to take water, risk assessments, trying to start estimating those risk. And if they’re really vulnerable, you start defining KPIs like, okay, those let’s say you invested in uh, beverage company three or four, indu factories are high risk.

What can you do to mitigate those economic risks? And also you can invest in new water, recycling water treatments, or onsite solutions that gonna reduce the risk of these companies, and Soly. But surely you start this, you start doing this with all your investments. First taking a risk assessment, then defending APIs for improvement, monitoring the improvement until they, they have an acceptable, let’s say risk written profile and then you start screening off.

The bad guy, the bad ones and the ones that don’t want to cooperate. Yeah.

Antoine Walter: When you say risk assessment, it’s like evaluating the cost of inion. What happens with the status quo what would be the consequences of not doing anything? And that gives you first cost and then you have the remediation possibilities and if the remediation possibilities.

Lower in costs than your cost of in action, then it’s a no brainer.

Nicola Lei Ravello: I would say even before you have, I mean, you have tool like the WWF water risk filter where companies can put their assets into the tool and get a report of what kind of water risk they are vulnerable to,

Antoine Walter: okay.

Nicola Lei Ravello: get the first assessment. Okay.

This factory in Mexico is extremely vulnerable to drought. Pollution and flood is okay. And then you get the first economic risk assessment, so you have a target, you have an idea of which water risk at play, and then you can start measuring it. Okay. How much cost the. The water treatment or the water efficiency measure to mitigate this, and what would be the cost of not having water in a given year or second year, then you can stack the whole financial calculation.

Yeah. And

Antoine Walter: so that the tool that you’ve developed yeah. For that private bank yeah. I guess, is something which is then proprietary to them. Yeah. So is it that kind of approach that you have with all those players to help them map out and yeah.

Nicola Lei Ravello: yeah. A hundred

Antoine Walter: Design their tools?

Nicola Lei Ravello: exactly. That’s, I mean, that’s kinda my job, and in a way that’s.

I think that’s what I find fascinating is designing investment process methodologies whereby you integrate sustainability and that change the entire way you, you allocate resources, you have to locate money, so yeah.

Antoine Walter: yeah. that’s one part of your job. There’s another part of your job, which. Probably the most visible part of your job is that I mentioned your articles are usually very detailed, so it’s almost a book chapter. And actually you went that extra step. Yeah. Because you’ve been, since the last time we discussed you, you’ve been writing a book.

Yeah. And if I’m right your crowd funding for a second book, so how is that part of your ecosystem?

Nicola Lei Ravello: Well look I started my company three years ago and start to look at water from a final perspective three years ago.

And my process was really, I would say explorative, when I quit my job three years ago in the finest industry, I really took the time to, to understand what I really wanted to do, and I look for the SDGs for inspirations of how can I contribute to a bigger goal, and for me it was pretty clear at the beginning that the water was linked to all of the SDGs, that that’s I mean, if you don’t have wider rights, nothing is right. So for me, I saw that really as a way to have a great.

Antoine Walter: impact.

Nicola Lei Ravello: And then it was real, like, I would say an explorative process lackings to start.

Okay. What is going on in the wider world? So starting to connect with as many water professional or investment professional, as I could start reading as much as I could on every book, every research piece, every article around water, and then starting to form my own opinion. And I was doing that by writing on LinkedIn pretty much every day for two years now.

Antoine Walter: It’s kind of building public.

Nicola Lei Ravello: Exactly. Yeah. yeah. It’s a bit that. Yeah. and yeah, and surely slowly but surely I kinda build up my own literature, my own database of articles of resources. And recently I’ve packaged this as in all my my best LinkedIn article into a book, which I can sell on my website.

What I’m trying to write about is really how the economy is changing with all climate change and what water scarcity and what’s the new status quo basically, and from all my LinkedIn posts were a bit like of a small bit of the puzzle here and there of what I see, and I’m trying to work on this mosaic build, build the entire, so the entire mosaic, and yeah, my book was a bit of a collection of the pieces of the puzzle.

Not really in a structured way because don’t see the whole thing yet, but then my bigger article is really trying to build on. On different subjects in water. And until I I can cover everything, so

Antoine Walter: is it possible to cover everything?

Nicola Lei Ravello: Well, I’ll try. , I’ll try, but I find it fascinating.

I mean, you have so much going on in water, I mean, I started with the public equity funds where there’s a lot of interest. There’s a lot of

Capital going there. And then I went into the stocks themselves, the companies, what were they offering how that was working, then the VC private equity.

 You have a lot of different topics and you have like water microfinance with water.org, which I think is fascinating. How they manage to create blend and finance structure to attract private capital, to finance water security around the developing world. Then you have also like initiative like Blue Peace.

know if you know about where it’s an initiative of the Swiss government to invest in water infrastructure in developing countries in a way to secure peace. So the idea is that there might be war because of the lack of water. So if you invest in water infrastructure, then the reason for war is going away.

So somehow you can invest in peace by investing in water infrastructure, which I think is a great idea.

Antoine Walter: that? That’s a very interesting question because sometimes I wonder if having a

Nicola Lei Ravello: tr

Antoine Walter: TRO isn’t influencing the way we look at the word and maybe sometimes a bit distorting the word because I’ve seen Michael Stanley Galisdorfer yourself as well, discussing on how the it’s gonna be difficult as a topic, but all, everything happening in Ukraine right now is linked to water.

How Ukraine cutting the water to Crimea, which have been taken over by, by by Russia in 2014 was the root cause. And I have no clue if that’s, it’s just an example. What I’m wondering here is that we have this lens of looking at water. Yeah. With this water is less than one person of GDP influences you the 99 person.

So if you look at water, probably you see the truth. And I’m just wondering isn’t that sometimes a bit too extreme to say water is old than everything and everything can be linked back to water. It’s a tricky question, sorry, but

Nicola Lei Ravello: I don’t know. I don’t know what to tell you actually, but I think that’s the truth, I mean, I think all our species as a human, as a species is here in this planet because of water, I mean, we made mostly about water. Civilizations developed. So well from the last ice age, because we had a lot of fresh water from the melting of the last glacier, so I think our entire story is based on water. And if you look at all the indigenous or all the culture around the world, the origining stories is always about water, so I think water from a physical scientific, or even from a cultural or spiritual way, I mean, we are water, I think that’s not too much of a stretch to, to state that

Antoine Walter: let’s me save you from my tricky

Nicola Lei Ravello: side. Yeah, sure.

Antoine Walter: Let’s come back. I was wondering, we discussed so far how the finance people shall look at water and how that shall influence the way they invest.

They build their portfolios and everything. I’m wondering. Now, if you look at the other side of the story, if you’re a water company and you need some capital to thrive in the future. Yeah. How do you have to shape and adapt yourself to be attractive for investors?

Nicola Lei Ravello: That’s a great question. That’s a great question. Well, I mean, I would first say that with climate change and the ongoing water scarcity water crisis, I mean the water companies are gonna be the one that deal with these issues, so I think the number of problems are gonna go up, and the water companies are gonna be responsible for that. So I think there’s gonna be definitely enough business for them and interest to, stay active. I mean, I think that’s the whole value proposition to invest in water companies, cause they’re gonna stay in business throughout climate change and deal with everything.

So they’re always gonna have, they’re always gonna be active and general profit. So that’s in some sense, this is a sec long term security for investors,

Antoine Walter: but on the other side of that same coin, it’s sometimes if you look at the pitches of any, what company is like, look, we are saving the word.

Hence we are selling activated carbon and people will start get pissed from the activated carbon industry, because I always take that example. I have nothing against activated carbon. It’s just like, to me an example of how it’s hard sometimes to connect thing, look 785 people don’t have access to to clean water.

My technology is fantastic and in between, there’s no direct link. So I’m wondering if those arguments are attractive enough for financial people or if sometimes they want to have a bit more meat on the bone, which will force the water companies to be a bit more practical about saying there’s that problem.

And we solve for that problem. Like really not just with words. I

Nicola Lei Ravello: Eventually you have to prove that you are solving an issue, otherwise you just, err, if you just pretend to do something over and over, then you don’t do it. Then. I mean, the job of financial people is to do this investment decisions to see if we give this money to this person is gonna do what he says it’s gonna do, Otherwise, you’re just trying money out of the window, so I think being honest about what your core mission is and your core values and what you intend to do and do it, that’s the best way to attract long term capital. You know, that’s the, that’s the whole little finance, it’s, trying to make some room in all the, what you hear every day and every day in the news to, to see if it’s true, so yeah, I mean, I think I’m make a good business, be sure about what you do and do it. Well, I think that’s the best. That’s the best you can. Do,

Antoine Walter: you, you mentioned you, you created White Stag three years ago.

Nicola Lei Ravello: Yeah.

Antoine Walter: How did the landscape evolve over this three years?

Nicola Lei Ravello: I would say that sustainability has definitely gone mainstream.

When I started, it was still I would say a fringe of the of financing, like, Ooh, that’s good. Yeah, let’s do that on the side. And but it really got big, quite fast. Actually. I was a bit surprised and how I was for me when I started, I say, okay, maybe that’s, I’m gonna be in the fringe of the discussion for maybe five or six years, but I mean, after one or two years, I mean the whole sustainability story almost get I mean now every asset manager puts sustainability in its front page, that’s the, that’s been the discussion at the moment.

So I would say that really sustainability has become the hottest topic now, the hot, the thing to be dealt with.

But then it’s like, how do you do it right now? And that’s the whole deal.

Antoine Walter: So that’s looking in the mirror. Yeah. But now if I look in the crystal ball, yeah. What do you intend to achieve over the next five, 10 years?

Nicola Lei Ravello: For me, it’s really Des what I really, what really like to do is designing in investment process, investment funds portfolio constructions, a as I said, as I’m really seeing it as as an engineering ex exercise, how can you design a structure that. Pull resources from one place to where it needs to go to create something, so whether that could be helping VC,

Antoine Walter: a VC,

Nicola Lei Ravello: private equity fund to, to select companies or having an investment process in there through public equity funds and also designing their portfolio construction strategy.

So

Antoine Walter: is it natural for those players , to seek help externally?

No.

Nicola Lei Ravello: that’s nothing quite new. I would say. I mean, usually there they do a lot of people do something in-house, but I see a lot of new asset managers that are more interesting to work with extend specialists, and do joint venture

And going that way.

So I think that’s also changing in the industry. Yeah.

Antoine Walter: Sure

Nicola Lei Ravello: For sure,

Antoine Walter: because for them, it’s gonna be hard to have a subject matter expert.

Like you are in house. Yeah. But not all of their investment will be water related. So maybe they don’t need you for the food portfolio, but for

Nicola Lei Ravello: Yeah. For me, that’s usually how I try to work.

Like, if you can help on a given project, maybe designing methodology or designing an investment process, then they, and then also supporting the implementation I come, I build something and then maybe I go away and then maybe I come back to build some something else, so

Antoine Walter: that’s

Nicola Lei Ravello: it’s really how I work. Yeah.

Antoine Walter: You escaped my question on your second book. Yeah. Is it still an active project because you have so many

Nicola Lei Ravello: Yeah, Yeah. Yeah. I mean, I have pretty much an idea of everything I want to write, so I’m really dedicating watch chapter to. To one type of investment, so I started with public equities as then with companies, stocks, and then startups and VC, and now it’s risk in the broader economy. And then I also want to write about microfinance about the Blue Peace piece and also water bonds, so yeah, there’s a lot of things I want to say. And I think somehow it’s all gonna come up into one book.

Yeah. The goal, what I really want to show is how can you invest in water? Not in the community itself, but all the infrastructure to, to secure water. And how is that an investment for the future? Cause I mean, we need this to adapt our societies to to climate change.

Yeah.

Antoine Walter: I had some weeks ago a discussion at microphone with Katrina Donaghy from civic ledger to discuss. They their roll out of water ledger in Australia and all the applications of cryptocurrencies and blockchain to, to the water sector.

Yeah. And if I recall rights, the first person ever to mention the combination of water and blockchain to me. Yeah. Was you, is it still something which you’re involved with?

Nicola Lei Ravello: No, not really. I mean, I followed I don’t remember the name of the company. Civic. Civic.

Antoine Walter: civic, ER, yeah. Yep.

Nicola Lei Ravello: I think that’s interesting. I think I think the use of blockchain, for designing marketplace and using the token technology a way to secure provide security and transparency in marketplace.

I think that’s a good idea. I think when we had the last interview, I just saw that and I think it was interesting, but I didn’t, I’m not involved in in any capacity yet on a, on such attack. Yeah.

Antoine Walter: Cause you know, what I’m trying to do with those interviews is always to try to connect the dots. It’s a bit like what you do with your building public with the LinkedIn pass, which is a bit, every time I uncover a little portion and sometimes I get some links

Nicola Lei Ravello: Then you try to see how disconnect to your previous post and how yeah. It’s really, for me, it’s really trying to put the pieces of the bigger picture, and see how everything goes goes together.

Huh?

Antoine Walter: You, you mentioned micro credits and I dunno if you read the book of Gary White and Matt Damon, the worth of water,

Nicola Lei Ravello: I didn’t read the book, but I’ve read the everything they’re doing. Yeah.

Antoine Walter: But they explain how water credit. So their micro credit product performs with 99 person return on the loans and how it’s allowed to bring so many people out of water, poverty, water induced poverty.

And I was just. Wondering if there could be a connection between decentralized finance. Yeah. Which could be cryptocurrencies, which could be blockchain, which could be something more traditional. Yeah. And micro credits where they struggle to find an investment fund and tell them, instead of putting 5 billion or 5 million tickets in inside a company, you have to put several 10 or 20.

I think the average ticket for what a credit is around $350. And it’s hard to go to an investment fund and say, look, you have to make tickets of three 50, but if you go to decentralized finance, maybe that’s an option. I don’t want to open a full side tribe because if not, I have to block you for one more

Nicola Lei Ravello: hundred

Antoine Walter: But just from the top of your, I

Nicola Lei Ravello: yeah, it looks interesting, the way water.org and water equity the asset management works is that they provide loans to local. so they have maybe in the portfolio, they have maybe 12, 12 loans, 20 big loans. And with the condition that these banks provide, these micro credits, so there’s also this intimidation in between. And yeah, I mean, you could use you could use

A technology, a blockchain technology there.

I mean, what I really like about blockchain, in general is really the transparency in the security you get for I’m also in involved in oceans, a lot. And for me, by from seafood is a great place, is a great industry where blockchain can really provide something, because with the blockchain, the tokenization, you can really

Antoine Walter: improve

Nicola Lei Ravello: the traceability.

Of your product through the supply chain, and that’s something that is really an issue in the seafood sector because like 25% of the fish that is sold is mislabeled. So one out of four fish, you don’t even know if it’s really,

Antoine Walter: one fish is

Nicola Lei Ravello: so it’s the same with algi as well, and algi are very specific properties in cosmetics, in health.

And so you need to know exactly which spaces it is, so with the help of the blockchain technology, you can secure the information from where it was arrested, what time what species it is and keep this information accurate throughout the supply chain. So for me, blockchain infrastructure has a, is digital infrastructure of your business is really interesting for

For sectors, an industry that lacks transparency, I would say.

And also EF and and security. Yeah.

Antoine Walter: it would be another deep dive,

Nicola Lei Ravello: it’ll be a lot. I’ll come back next year.

Antoine Walter: You said you would be coming back next year. So I think maybe we opened the door, which we can follow on next year. Well, Nicola, it’s been a pleasure to have this this deep dive with you on the finance side of things and on everything you do within that word.

I propose you to switch to rapid fire question to run it off.

Nicola Lei Ravello: Go ahead.

---

Rapid fire questions:

Antoine Walter: Since last time some of them changed, but I’m not sure if all of them changed. So let’s see if your answers are the same. My first question is what is the most exciting project you’ve been working on and why?

Nicola Lei Ravello: I had many projects already. Interesting. But I’d said like the one I discussed before, like for this bran bank of redesigning the entire investment process based around water.

I mean, that was really interesting because it was really a top down big strategy. I mean, like redesigning the strategy of the bank,

Antoine Walter: can you give a name and say it UBS

Nicola Lei Ravello: No, it was prefer not, but uh,

Antoine Walter: go into my tricks.

Nicola Lei Ravello: yeah, no, I mean it’s really interesting when you start redesigning entire processes, it’s, I guess for it’s the same, if you could build your own waste water treatment plan, so it’s pretty exciting.

If you can do it the way you want, then

uh,,

Antoine Walter: I think it’s a good analogy because it’s really, you have one output, one outcome, and you have so many different ways to go from one to the others and you have to define which one

Nicola Lei Ravello: is. Yeah. And you have to design it in a way that is to a change environment. So you need to account to new issues, new problems, new parameters, and to make sure that this new project is gonna survive the new status quo, that’s pretty exciting.

Antoine Walter: you name one thing that you’ve learned the hard way.

Nicola Lei Ravello: I would say it’s I think nothing is given. You always have to push for more and stay relevant and stay up because the projects are not gonna come to you. I think you also know that and yeah. So stay connected, stay on the top of the of your competencies and your knowledge and yeah. And trying to see where you can you can contribute.

Yeah.

Antoine Walter: Yeah. Is there something you’re doing today in your job that you will not be doing in 10 years?

Nicola Lei Ravello: I don’t know, like, I also have a friend that has started his own consulting business at the same time as me and he is more to the corporate consulting. So he company advise company how to integrate sustainability.

I’m more on the finance side and we always talk between us. Like, we are always exchange, and he has more taken away of like building his own company. He always, he already has hire for people, and it’s really building his new consulting firm, and for me I’m more like I don’t really wanna build a company.

I mean, I don’t really wanna be a manager of, I think I really like what I do, so I kind of see more myself as an independent consultant, like a carpenter, like maybe I’m gonna have an intern and I’m getting some sort of mentorship going on there, but I don’t see myself. Like, I really like what I do, so I don’t see myself outsourcing maybe.

Antoine Walter: maybe.

Nicola Lei Ravello: Yeah. Maybe like, reviewing the typos and the language of the documents. Yeah.

Antoine Walter: what is the trend to watch out for in the water sector?

Nicola Lei Ravello: It’s a good question. That’s a good question. I mean, for me, the bigger picture is how water is gonna become more part of the climate sustainable discussions. Cuz I think eventually it will be one of the main, as big as carbon now, but that’s a bit of a long term and yeah, I think the valuation part is interesting as well, because since the market condition is gonna change the liquidity is gonna be probably withdrawn from the central banks, how this is gonna affect valuation is how this gonna affect financing.

That’s gonna be interesting.

Antoine Walter: I cannot avoid that sidetrack.

Nicola Lei Ravello: Should I go for it? I know it. I see you want

Antoine Walter: have you followed this story of the natural asset companies, which the Doron is putting in place together? I think with the rock feller foundation.

Okay. So you could be. Putting on the market. One of the nature services, the idea being that the first industry there is in the word mm-hmm is nature by far bigger than anything else, because it’s providing services. And if you can put a value on that,

You can raise money. To go to together with this value and that money that you raise will allow you to preserve yeah.

These assets of nature. And then it’s not something like you can invest in, in a natural park and then exit from it, exit won’t happen. But if you do the right preservation move, then the natural asset company will have a raise in valuation. Yeah. And then you can

Nicola Lei Ravello: yeah I mean, I didn’t look I didn’t know this particularly.

I’m gonna look it up, but I think it’s the same story for carbon credits. Like if a forest or a park or Marin park can get some financing, by issuing, carbon credits from the forest, it has, then you can use this financing to preserve its own park. I think that’s a great tool

Antoine Walter: And that brings the liquidity, which you

Nicola Lei Ravello: yeah.

That’s that provides the liquid that provides the cash and liquidity for the park to to just, I mean, to patrol, if it’s a Marine park you need to constant patrolling, I mean also not normal park in Africa, I mean, poaching is such a big big issue that even if you have low, you need to spend a lot of money on patrolling.

But it can also be I mean, you need to be careful with it because you can also backfire, I mean, I’ve seen stories where some some farmers in the UK or some park developers were squeezed out because suddenly these forests has generic cash flows, and then the, some banks or asset managers want to buy them to, to have access to this money streams, and they may not have the desire to protect or put this cashflow into forest protection, so

Antoine Walter: it’s always hard to walk that very fine line.

I, I really told that story on that microphone that I was giving a conference in a university, in, in France and at the end of the conference not the students, but a lot of the professors just stood up and said, you’re like you’re supporting the capital devil. Yeah. And and you should not make water sustainability environment on one hand and finance money and investment.

On the other hand, those two words should be excluded one from the other.

Nicola Lei Ravello: Well, I think it’s the whole discussion is sustainability. Like, I mean, I think capitalism for as a system of society for the last 250 years or so was working really well until it met planetary boundaries, I mean was working well for fringe of the population.

You all have a lot of social issues underneath of that, that is, needs to be fixed as well. But now it’s how do you change? How do you adapt that system? Should we just forgo all finance? I mean, is that even possible? Can we switch from this to another system, or you’re trying to find concrete and some solution on the spot, so those carbon credits, they might be some greenwashing, they might be some bullshit, but then they also can bring money to. On the table to, to finance the conservation of the park, so

Antoine Walter: mixed feeling as a summary

Nicola Lei Ravello: yeah. Yeah. I mean, I think I see it’s like any tool, I mean, you can build

Antoine Walter: it’s about what you do about it.

Nicola Lei Ravello: What’s what you do about it. Yeah. I think that’s the bottom line. Yeah.

Antoine Walter: Let me bring you back on track. Yeah.

Nicola Lei Ravello: sure.

Antoine Walter: and sorry for the sidetrack. I couldn’t

Nicola Lei Ravello: no I like it.

Antoine Walter: If you were a world political leader.

Yeah. What would be your first action to influence the fate of the worlds? Water challenges?

Nicola Lei Ravello: Good question.

Yeah, I think education about water. I think it’s important, really trying to understand show how water is really important for everything, for not only for business and the economy, but also for everything we do, . Yeah, I think in investing in awareness and education can do, can go a

Antoine Walter: long

Nicola Lei Ravello: way.

And because I think, and I, that’s, what I see from what I write is when people have this haha moment, then it becomes quite clear, it’s, you see everything as a, in a new way and how everything is dependent on water, so I think if you can support education and awareness, you can go a long way because I think there’s gonna be a need to a shift in mentality and a shift in mindset, to cause a lot.

There’s still a lot of people that don’t want to see the problems at hand and say, oh, we can we can ignore it a bit longer, because uh,

Antoine Walter: that’s the thing of the full word of SaaS where you have, you can have your full funnel. The important thing is the activation metric and there is one single activation metric, which is gonna be exactly this aha moment you mentioned.

And it’s true that if we

Nicola Lei Ravello: can.

Antoine Walter: activate that and find out what is this activation metrics so that everybody sees, like you break the hollow effect and you all of a sudden realize that

Nicola Lei Ravello: you break the fantasy. The, yeah. Water

Antoine Walter: is, I mean, water is everything is an empty sentence, but the consequences of not water or too much water of too few. And that,

Nicola Lei Ravello: well, I think sooner or later this is gonna happen, the goal is to make sure it happens soon enough

Antoine Walter: would you have someone to recommend me that I should definitely invite as soon as possible on that microphone?

Nicola Lei Ravello: Do you know Frank Barroso from Waterpreneurs in Lausanne? It’s it’s a company based in Lozan. They organize water conference, water events, where they bring a lot of new startups and finance here together to and also a lot of people connected to water together to see if they can match some stuff.

So yeah. Maybe try with them. Yeah.

Antoine Walter: And if people want to follow up with you, let’s say I’m an asset manager and all of a sudden I clicked because I listened to you during this full hour.

Yeah.

Nicola Lei Ravello: Yeah.

Antoine Walter: Well, shall I

Nicola Lei Ravello: I’m reachable on LinkedIn. As I said, there’s a lot of I write a lot there on a daily basis, so I can be rich there or to my website.

Yeah.

Antoine Walter: So as usual,

Nicola Lei Ravello: Yeah, the I’m pretty traditional for that. yeah.

Antoine Walter: very good Nicola. It’s been a pleasure.

Nicola Lei Ravello: Thank you for

Antoine Walter: your, and uh, see you probably next year.

Nicola Lei Ravello: Yeah, I will be there. we can go. We can have a podcast outside next time.

Antoine Walter: That’s yeah, that’s

Nicola Lei Ravello: by the river by the Riverside. I mean, we can have a podcast near the water, yeah. Okay. Or in the water if

Antoine Walter: so the next one is a Zurich lake

Nicola Lei Ravello: podcast? Sounds good. Sounds good. Yeah,

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