Water Impact Fund, the first European water fund is to be launched with HUF 5 billion initial capital under the management of Susterra Capital Partners Kockázati Tőkealap-kezelő Zrt. and with the investment of MFB Invest Zrt., a member of the Hungarian Development Bank Group. The venture capital fund planned to reach EUR 200 million primarily wishes to invest in undertakings contributing to the solution of global water problems, such as access to clean drinking water and sewage system as well as the more effective industrial water use. The main objective of the fund to be launched in November this year is, besides financial return, to have a measurable and sustainable positive impact on the environment through its portfolio companies.
János Áder, the President of Hungary announced the setting up of a Hungarian investment fund to foster water developments on the 2018 World Water Week in Stockholm. The new fund will contribute to mitigating the global water crisis with a new, innovative means of financing. In November 2019, Water Impact Fund, the first European water fund will be launched with the investment of MFB Invest Zrt and with Hungarian-owned Susterra Capital Partners Kockázati Tőkealap-kezelő Zrt. being the manager of the fund.
The venture fund starting off with an initial capital of HUF 5 billion and planned to reach EUR 200 million plans to involve additional international and domestic investors in the course of 2020 and 2021, in relation to which Susterra Capital Partners is carrying out negotiations with the representatives of international investors, including, amongst others, AIIB, EIF and the German Finance-in-Motion. The fund plans to deploy the capital entrusted to it in Hungary in the period between the first and the second closing, and, after additional investors have joined, it plans to invest capital in the Central Eastern European and DACH regions while maintaining a preference for investments within Hungary. Furthermore, after potential Asian investors have also joined the fund, capital will also be deployed indirectly in the Asian region.
The fund is set up with a duration of 10 years, with 5-year investment and 5-year exit periods, and with an expected yield of 12%.
The fund primarily wishes to invest in undertakings in the water, sewage and other water-intensive sectors with significant growth potential and with a sustainable and scalable business model that contribute to the solution of global water problems, such as the lack of permanent, proper quality and affordable access to clean drinking water and sewage system. Another important goal is to make the water use of water-intensive industry sectors (such as agriculture and the food industry, etc.) more effective (water impact), with special regard to economic damages caused by drought, which may also result in a substantial GDP loss in Hungary. The objective of the fund is, besides the anticipated financial return, to have a measurable and sustainable positive impact on the environment through its portfolio companies.
With this geographical and sectorial approach putting corporate maturity in focus, the water fund brings a paradigm shift in the field of water financing and sets a strong international example of one of the possible paths for international venture capitalists to solve the typical challenges of the water sector as defined at the Budapest Water Summit.
The target entities of the fund include companies running for several years that have a custom developed and technologically verified product or service, but lack the funds necessary to reach new, global markets. In addition to the capital to be invested, the Fund Manager is ready to put its several-decade-long technical, investment-related, financial and business development expertise to ensure that such companies can establish a successful presence on the global market and may contribute to mitigating the problems caused by the global water crisis.
Water is present in every industry sector and the population growth, the predominance of urban population and the climate change demand new and innovative technologies allowing for the more easy, cost-effective and efficient access, cleaning and reutilisation of water, the production of energy from it and the reduction of water use and emission. At the same time, the spreading of these new technologies calls for a new type of financing taking into account the fact that the companies manufacturing them do not meet the criteria of traditional bank financing. As venture capital funds offer commercially sustainable solutions to satisfy a market demand of thousands of billions of dollars, the rationale for venture capital funding has increased in these sectors.
Hungarian Development Bank
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MFB Invest Zrt.
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Susterra Capital Partners Kockázati Tőkealap-kezelő Zrt.
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