JP Morgan Executive Director Pradipta Parhi, who is also a member of the company’s climate team, joined me on a recent episode of The Impact to discuss why water is a key strategic asset and how it fits into global climate action.

Jeff Gitterman: Let’s start by just thinking about why is water such a critical topic today? And it’s not just in the us, it’s a global topic that really is taking off because of many different instances. 

Pradipta Parhi: The main thesis is that water, if you think about the supply and the demand dynamics, was in equilibrium for a long time. But that has been disrupted recently for many, many different factors. So, if we just start to talk about the demand side, to think about this is easier if you just think about three Ds: de-globalization, digitization, and decarbonization.

If you think about data centers, AI queries are a hundred X more energy-consuming, and all these data centers actually require a lot of water for cooling. So in a way, these are kind of interrelated, but energy is talked about a lot, but I think we forget about water. So that’s kind of the other factor in digitization.

And finally, decarbonization. We have energy transition. Of course, the speed and scale is sometimes volatile, but broadly speaking any energy transition will require a different type of water demand. For example, in the U.S., we are still going high with a lot of nuclear geothermal assets, which are not necessarily less water-intensive.

Yes, solar and wind are less water-intensive, but when you think about the portfolio, we need energy that will actually require more water.

JG: So what’s next for the water sector. We have extreme demand occurrences and we have problems with supply. So this equation between supply and demand, which is always good for any investment cycle, is there, but we also desperately need water to live. So when you look at the future, the next five, 10 years for water and water investing, what do you see?

PP: I can talk about three big ideas here. If you’re in the U.S. or [other developed economies] the public finance we tracked is kind of going down. So the private sector financing has to come up and compensate. And we might need $2 trillion over next two decades for all the infrastructure, all the gaps.

When you move to India and other developing countries, we might have to think about private and long-term concessions, other kind of mechanisms where private sector solutions might have better reliability, service quality, and better acceptance by the consumers. So we might see those kind of trends in other countries.

And then finally when we talk about technology, the biggest leverage is actually in the membrane technologies and a lot of desalination technologies. So the big challenge for technology solution provider would be, can you bring down the desalination cost?

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