Investing in water, a trend that also pays off for humanity

Population grows and needs water, food production grows and needs water, industry grows and needs water… The efficient management of this valuable raw material has become an interesting sector for investors. Technology and innovation are the keys to reducing water consumption and recycling it.

Water is a treasure, but will become even more precious in the coming decades. Based on projected consumption and current use practices, the world will face a water deficit of 40% by 2030. By 2025, 1.8 billion people will live in regions with absolute water scarcity. These forecasts, published by the World Bank, reflect the complex situation the world faces regarding the use of the most basic commodity: water. 

Looking even further ahead, the data are no more positive. By 2050, the world’s population is expected to exceed 10 billion people, which translates into a need for 56% more food production. Considering that agriculture currently accounts for 70 % of total freshwater consumption, its demand will increase by 19 %. But this is not all: this increase in population will translate into an increase in domestic water demand of 130%. Industry, on the other hand, will also see a 140% increase in water demand.

This high demand is compounded by the fact that of the total of 1,693 aquifers examined worldwide, there was a significant reduction between 2000 and 2022. This combination of factors makes investment in water an alternative. Both as a way to address or minimise future scarcity problems, and as an interesting and unusual investment opportunity.

Water infrastructure investment

Source: World Economic Forum

What is water investment about?

According to a Goldman Sachs report, water consumption is expected to increase by more than 1% per year over the next 30 years, mainly driven by economic activity. While only 12% of global water consumption is for domestic use, the remaining 88% is consumed by agriculture and industry. In response to the imperative for more efficient water management, companies are looking for advanced technologies to reduce consumption and recycle water. This is where investment opportunities are arising, in companies moving technology and innovation into water use in order to respond successfully to future demand.

Many companies, both large and small, are committed to innovation in water use. In Switzerland, companies such as Bausec are transferring sensor technology to detect water leaks and prevent waste. While others such as PriWaTec, AQUA GONTIER or Macauda Spültechnik are focused on improving water treatment and water quality with an eye on saving water consumption and respecting the environment.

Investment funds, ETFs, blue bonds…

There are many different ways to invest in water: with mutual funds , ETFs (exchange-traded funds), equities or blue bonds. Some of the best known funds have a similar approach to investing in listed companies with a focus on water treatment and better water management.

Blue bonds are debt issuance instruments designed to protect oceans and marine ecosystems by preserving them. These bonds are used to finance projects that establish water treatment and management infrastructures, as well as to implement measures to conserve marine biodiversity.

The performance of water

To answer the question of investment returns, the best way is to take a look at the performance of some of the funds and ETFs over the past few years.

According to the International Bank, the water and wastewater treatment market will reach 956.48 billion by 2032, with a compound annual growth rate (CAGR) of 5.4% from 2022 to 2032. Furthermore, the Fidelity report notes: ‘It is estimated that industry revenues could grow by 4-6% per annum for a long time to come, and companies that can innovate and deliver new solutions enabled by science, technology and artificial intelligence will grow the most.

Water goes public

In 2021, it was announced that water would, for the first time, be listed on the stock exchange as a commodity. Under the name NQH2O, investment funds and farmers in California can buy futures to guarantee a certain price for water. For many farmers, this allows them to guarantee supply and prices during periods of drought. However, for the moment it is only focused on this American state and not on a global level, just like oil.