Environment

How Water Became an Investment Opportunity

In July 2010, the United Nations declared that access to safe and affordable water is a basic human right. Since that declaration, the world has made improvements towards broader access, but there is still a very long way to go.

According to a June 2019 study by UNICEF and the World Health Organization, roughly one-third of the global population does not have access to safe drinking water today. Access to safe drinking water means “drinking water from sources located on-premises, free from contamination and available when needed.” More troubling still, the study also found that roughly 785 million people worldwide lack basic water services entirely, and some 144 million are reliant on untreated surface water.

The World Economic Forum’s 2019 Global Risks Report, which annually identifies the most pressing global challenges, placed water crises among the top four risks, just behind extreme weather events, failing to prepare for climate change, and weapons of mass destruction. As the effects of climate change spread and become more pronounced, problems surrounding access to clean water are only expected to increase. According to the World Health Organization, roughly half of the world’s population will be living in water-stressed areas by 2025.

So, what are we to do with this troubling information? Throw up our hands and wait for someone else to sort it out? Innovators across the globe think not. They are looking to the future, and to technology, to develop the systems that will provide access to clean water across the globe. As they work to address one of the most pressing problems of our time, they will need capital, and lots of it.  For those interested in investing in this rapidly-growing sector, however, there are a few important points to understand.

The Trouble with Water Access

At the heart of the global water crisis is the fact that water is too scarce in some places, too abundant in others, and the water that we do have access to is often expensive to treat. It is often not feasible to move large amounts of water great distances, and techniques for capturing and cleaning water in one place will not necessarily work in another.  As such, innovators are coming up with local solutions to this global problem.

Water is often in short supply in the arid Atlas Mountains of Morocco, and climate change is driving the region into deeper and more persistent drought. After learning about fog harvesting used in other parts of the world, a Moroccan nonprofit teamed up with a German company, Aqualonis, to design and install a massive array of nets high in the mountains to harvest fog rolling in from the Atlantic Ocean. The project doubled the amount of water available to people in surrounding communities. Following the success of the Moroccan project, Aqualonis is planning several other fog catching projects across the globe.

Another striking innovation comes from Cody Friesen, founder of Zero Mass Water. He discovered a way to “pull” water from the air using solar panels, even in places where the air is quite dry. The panels have been installed in 33 countries across the globe, and they are providing clean drinking water to communities, refugee camps, and businesses. Zero Mass Water is now backed by a $1 billion fund led by Jeff Bezos and Bill Gates.

The Market Opportunity in Water

According to investment firm RobecoSAM, “Market opportunities related to the water sector are expected to reach USD 1 trillion by 2025. Companies that are early to respond and take steps to exploit the market opportunities associated with these water-related challenges are more likely to gain a competitive advantage and achieve commercial success.”

The global water crisis is not going away on its own, and climate change is only going to make the situation more dire in coming years. Investing in companies addressing the global water crisis makes financial sense because there is a growing demand for an increasingly finite resource.

The case can also be made that investing in water innovation is also a socially responsible investment. We are going to need many more innovations in the coming years to fully tackle the global water crisis, and investing now in companies already at the forefront of the fight will encourage further innovation.

How to Invest in the Future of Water

You cannot invest in water itself, of course, but you can invest in companies creating solutions to the global water crisis. For instance, the AllianzGI Global Water Fund specializes in “investing in companies offering solutions to help solve the global water challenge.”  This fund returned an annual average of 9.83 percent over the past 10 years, compared with 5.37 percent for its average Morningstar peer.  A search on Magnifi suggests that there are a number of other ways to profit from water innovation as a whole.

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This blog is sponsored by Magnifi. The information and data are as of the  November 6, 2019 (publish date) unless otherwise noted and subject to change.