- Oct 25, 2017
Water is easy to take for granted. It falls from the sky, and, though it’s vital, we sometimes treat it as if it’s worthless. How often have you seen sprinklers running in the rain?
Yet the prospect of shortages in the years ahead could make water a precious commodity. That represents an opportunity for investors.
A small group of traditional mutual funds and exchange-traded funds already invest in it, mainly in companies that contribute to the delivery, testing and cleaning of potable water. Those companies stand to grow as governments around the globe strive to stem the expected water shortfalls.
“Water scarcity is a global phenomenon,” said Andreas M. Fruschki, portfolio manager of the AllianzGI Global Water Fund. “And it’s most pronounced in regions with the highest population growth,” like the Indian subcontinent and the Middle East.
Population growth, climate change and pollution are disrupting the world’s freshwater supplies. The United Nations Environment Program has predicted that half the globe’s population could face severe water stress by 2030. Annual expenditures of $200 billion, up from a historical average of about $40 billion to $45 billion, are needed now to keep spigots running, the U.N. said in a 2016 report.
Even developed countries face rising costs to deliver water, because water is heavy and hard to move long distances. “Rain in New York doesn’t help Southern California,” Mr. Fruschki said. On top of this, much of the water infrastructure in the developing world is antiquated and overdue to be replaced, he said. That’s leading to water-main breaks across the United States and the loss of two trillion gallons a year of drinking water, according to the American Society of Civil Engineers’ 2017 Infrastructure Report Card.
Literally the villain plot from one of the shittier Craig Bond films, but real, entirely preventable over the past decade, and with the endorsement of the biggest paper in the countryA quirk of this sector is that, though water is a commodity, it can’t be bought directly in the way many other commodities can be. “It’s not a tradable good like oil,” Mr. Fruschki said. Australia has a water market, called Waterfind. But in the United States, betting on the price of water requires buying land that has water rights associated with it. Harvard University’s endowment, for example, has bought up California vineyards and thus acquired control of their water rights.