Incofin reaches €36m first close on ‘first-of-its-kind’ blended finance water fund

W2AF confirms the water sector is 'investment ready' and will be judged on its climate and gender impact, says impact manager Dina Pons.

Incofin’s blended finance fund is the “first-of-its-kind” to focus on providing safe drinking water, according to a press release from the Belgian manager. It has reached a first close on €36 million, with a hard cap of €70 million.

The fund, dubbed W2AF, will focus on water distribution, primarily in Africa and Asia. Projects in India, Cambodia, Kenya and Senegal are among those that have already been considered.

Blended finance is a strategy that combines capital with different levels of risk. Typically, development finance institutions or other donor bodies provide the initial first-loss capital on below-market terms, allowing private sector investors in the fund to benefit from higher rates of return. It is usually used to direct private capital towards emerging markets.

From an impact perspective, Incofin aims to provide 30 million people with safe drinking water. “We want this fund to provide drinking water to low-income populations,” regional director for East Asia and impact manager Dina Pons told New Private Markets. “So we will track the socio economic profile of the clients overall, and the affordability of the water that we are providing.

“We will [also] track how many female clients are receiving sustainable, safe drinking water. You can then extract how much amount of time is being saved in their daily life that they can now spend on economic opportunities or schooling.”

There is also a climate angle. “This fund is article 9 [under SFDR], and it’s important for us to make sure that we embark each of our investments onto a journey of understanding how can they enhance their climate resilience,” Pons added.

Pons explained that, while the fund will deliver returns for investors, LPs need to manage their expectations. “The fund is saying ‘this sector is investment ready. You can make some money out of it, but you need to respect certain economics of things.’ It needs us to back businesses that are still going to be in the growth phase, they’re still going to be operating with clients who have low purchasing power,” she said.