Opportunities for positive biodiversity and clean water impacts in Brazil

Access to clean water and sewage systems for treatment of wastewater are taken for granted by many. Not so in parts of the world where this essential infrastructure remains limited.

The United Nations’ Sustainable Development Goal 6 (UN SDG 6) aims for “universal and equitable access to safe and affordable drinking water for all,” yet over 2 billion people are still without it. Added to this, 80% of wastewater goes untreated.¹

"We see water infrastructure development in emerging markets as a growing theme in global impact credit investing."
Ellen O’Doherty, CFA, Impact Analyst

We see water infrastructure development in emerging markets as a growing theme in global impact credit investing. This aligns to our broader increasing focus on the blue economy, water and ocean sustainability, and marine biodiversity—areas that require the most investment in terms of sustainable development. 

As a fixed income impact manager,² we look to drive investor contribution through origination of and direct provision of capital. We work with companies and organizations to structure and issue debt that can be specifically allocated to credible blue economy projects.

Brazil’s water infrastructure challenge (and opportunity)

Brazil faces environmental and social challenges. It is a vast country, so providing infrastructure to rural areas is no small feat, and it has some of the world’s largest and most densely populated cities. Thirty million Brazilians currently lack access to clean water, and 90 million do not have a sewage connection. The government has pledged to achieve universal provision of both by 2033.³

Brazil was the first country to formally adopt International Sustainability Services Board (ISSB) standards one and two, at a national regulatory level. These standards set requirements for sustainability- and climate‑related financial disclosures. Brazilian corporate sustainability reporting will be mandatory for all publicly listed companies by January 2026. We think these moves indicate the commitment within the country to addressing environmental challenges and helping ensure that the required investment occurs. Among other things, regulation should help to improve the quality of data for the sanitation sector.

The investment needed for universalization of clean water and sewage connection is estimated at around USD 163 billion (BRL 893 billion).⁴ This could yield substantial long‑term economic, social, and environmental benefits, reducing hospitalizations and deaths related to inadequate environmental sanitation, for example, through waterborne diseases. As companies expand their infrastructure networks, they will be able to increase coverage for lower‑income areas of society through social tariffs. 

Effective execution relies on companies’ ability to manage key risks

The scale of capital investment needed creates an opportunity for companies that can execute effectively, but they will need to navigate several risks.

"The scale of capital investment needed creates an opportunity for companies that can execute effectively...."
Mariel Abreu, Credit Analyst

(1) Climate impact

Heavy storms, droughts, and heatwaves are predicted to become more frequent and severe throughout Brazil. These events cause power failures and water contamination and put pressure on water sources and energy demand. Companies will need to focus on hydro security by diversifying water sources, reducing demand on stressed areas, and increasing storage capacity, which some companies are already doing.

(2) Regulation

Local and national government support is needed, although at a local level; for example, following the floods in the southern state of Rio Grande do Sul it has so far been unforthcoming. Drainage is key to address flooding risks, but it is capital intensive and difficult to monetize, meaning government grants or subsidies are needed. Lack of government support may impede expansion.

(3) Greenhouse gas emissions

Water companies emit greenhouse gases, namely methane, through wastewater treatment, although sanitation accounts for only about 4% of Brazil’s total emissions and this is outweighed by wider social and environmental benefits, in our view.⁵

Nevertheless, companies can address this. We see Brazilian private water and sewage company Aegea as a leader in this area. It sources 98%⁵ of its energy from renewables and is progressing well toward ambitious energy reduction targets. In a recent visit to the company’s sites, we saw how Aegea has installed more energy‑efficient aeration infrastructure (see photo below, taken during our visit).⁶

As water companies expand their infrastructure networks in Brazil, we continue to assess progress to identify potential environmental and social impact credit opportunities. Those companies that do execute well could strengthen their market share and gain as a result, simultaneously delivering vital positive impact as well as potential returns for investors.

Driving additionality and measurable progress

By contributing direct investments in new water supply and wastewater treatment infrastructure within emerging economies such as Brazil, public fixed income investors have the potential to create additionality. At the same time, we aim to drive the development of credible global standards for blue bonds financing water and wastewater infrastructure projects. Whilst the primary impact of allocating blue bond proceeds toward sanitation infrastructure contributes to UN SDG 6, these investments can also deliver tangible social and biodiversity benefits across the Brazilian sanitation market supply chain, driving measurable progress while supporting sustainable development.

"As water companies expand their infrastructure networks in Brazil, we continue to assess progress to identify potential environmental and social impact credit opportunities."
Ellen O’Doherty, Impact Analyst

Case study—Aegea

Aegea is a leading private water and sewage company in Brazil with about 40% market share serving more than 30 million people.⁷ Aegea recently issued its first USD-denominated 750 million blue bond to fund expansion and improvement of the water infrastructure network to increase provision and access, as well as to reduce water losses. T. Rowe Price contributed to the transaction by providing guidance on the selection of blue project and impact key performance indicators to ensure credibility. In August 2025, we visited its sites in Rio de Janeiro and Porte Allegre, giving us a firsthand look at some of the company’s positive environmental and biodiversity impacts.

Biodiversity

In Rio de Janeiro, Aegea has invested significantly in wastewater collection infrastructure and environmental education, including construction of a 9km long wastewater collection tunnel. This has reduced wastewater pollution in Guanabara Bay (see photo above) where new species of fish and turtles have appeared over recent years. We saw several shoals of whiting during our visit.

Water management

Only 50% of wastewater in Rio de Janeiro is treated, which Aegea aims to raise to 80% in the next five years.⁸ Last year, Aegea installed systems to measure the output of treated water, which it monitors in its control room (see photo above).

These measurement tools could help Aegea continue to reduce water losses, working toward a target of a 25% to 30% loss rate over the next three to five years.⁸

Social

Over 2 million people benefit from Aegea’s social tariff, which provides a 50% discount on water and sewage bills and supports equitable access to sanitation.⁸  The proportion of customers covered by the tariff should increase as Aegea expands operations in underdeveloped regions.

Aegea creates many quality jobs, including for people living in the local communities, to carry out infrastructure expansion.

Capital expenditure focused on business operations

In 2024, we saw a substantial increase in Aegea’s capital expenditure,⁸ and we expect it to increase going forward as Aegea targets sanitation universalization across Brazil. Capital expenditure (capex) is focused on Aegea’s business operations. This includes:

• Dedicated infrastructure: Expanding sewage coverage and water treatment capacity to handle climate-related stress.
• Technology integration: Implementation of energy-efficient systems and renewable energy procurement.
• Resilience building: Infrastructure designed to maintain service continuity during extreme weather events.

Identifying key risks and simplifying operations

When we met with Aegea in August, we discussed the key risks the company faces around execution and its reliance on debt to finance expansion. Aegea also gave us an overview of its focus on simplifying its operations and improving operational margins in new concessions.