In recent years, investing in water has become popular as a form of sustainable investment. Although many people are scandalised by the fact that this resource is being commercialised, there is a general lack of knowledge about what this really implies and what alternatives we have as investors to have exposure to this much-needed asset. Read on to find out how to invest in water and the options you have.
How to invest in water in the stock market?
Water is the source of life, and in the investment world, it can be a good way to diversify your portfolio. Water investments do not affect the supply of water – such investments are only designed to invest in water-related companies, such as irritation, water treatment, and many more.
It is not possible to invest in water directly. Rather, to gain exposure to this asset, you may consider buying:
- Shares of water companies
- Funds (such as ETFs)
- Water futures
Why invest in water?
Water is a scarce resource. Out of all water on the Planet, only 1% is readily available freshwater. As with any scarce resource, this creates an investment opportunity.
In addition, population growth, socio-economic development, and consumption patterns are increasing the demand for fresh water. According to the United Nations World Water Development Report, global water demand is expected to increase by 55% above the current level by 2050. Some of the countries that experience water shortages are in South Asia, but Italy, Spain, and Mexico also deal with water scarcity.
Water scarcity may seem like a distant problem when for many of us it is readily available, but the truth is that droughts are increasing around the world.
This pressure on global supply has prompted governments and businesses to find methods to save and manage water more efficiently.
These innovations range from converting seawater into fresh water to introducing smart meters and smart devices to reduce its use.
As investors, we can do our part by investing in these companies researching and managing this “blue gold” more efficiently.
3 ways to invest in water
Investing in water stocks
First of all, you can invest in stocks related to water, such as companies that deal with supply, treatment, infrastructure, and many more.
These are the main water stocks listed in Europe:
Main water stocks in the USA:
|Watts Water Technologies||WTS||135,78%|
|American Water Works||AWK||106,06%|
|American States Water||AWR||89,23%|
Main water companies in China:
- Beijing Enterprises Water Group (BEWG)
- China Water Affairs Group (CWAFF)
- China Everbright Water Ltd (BOTRF)
It is also worth noting that, within Asia, there are many other companies with great returns such as Kurita Water Industries (TYO: 6370) from Japan, which has achieved 88.68% over 5 years or Nongfu Spring (HKG: 9633) from Hong Kong, which has reached 27.61% over 5 years.
As an alternative, you can also follow the steps of Michael Burry, who invests in water via food production companies. He believes that the most efficient way of investing in water is to support companies that produce food in water-rich areas and transport it to regions where water is scarce.
Investing in water funds
Another way to gain exposure in this sector is by investing in actively managed funds:
|Funds||ISIN||Fee||Return on Investment in 3 years|
|BNP Paribas Funds Aqua I Capitalisation||LU1165135952||1.75%||10.42%|
|Robeco SAM Sustainable Water Equities I EUR||LU2146192377||1.50%||10.40%|
|Pictet-Water I EUR||LU0104884605||1.60%||7.42%|
|Allianz Global Water At Eur||LU1890834598||1.75%||5.20%|
|Panda Agriculture & Water||ES0114633003||1.98%||5.10%|
Another option we have is to invest in indices composed of the main companies in the water sector. Investing in the best ETFs is an easy and convenient way to have a diversified portfolio.
Some of the main water indices are:
- S&P Global Water Index: Composed of 50 companies from all over the world related to water. The companies are equally divided into two large groups: Water Public Utility Services and Infrastructure and Water Equipment and Materials.
- Société Générale World Water Index: Composed of the 30 largest global corporations in the sector: Water Public Utility Services and Infrastructure and Water Treatment.
- Others: The Dow Jones U.S. Water Index, ISE-B&S Water Index, S&P 1500 Water Utilities Index, etc.
Currently, there are a few ETFs that follow these indices. These are the ETFs with which you can invest in water:
|Global X Clean Water UCITS ETF USD ACC||IE000BWKUES1|
|Lyxor World Water UCITS ETF (WAT)||FR0010527275|
|iShares Global Water UCITS ET (IH2O)||IE00B1TXK627|
|L&G Clean Water UCITS ETF (XMLC)||IE00BK5BC891|
If you want to invest in water, you may also opt for futures. Although options are limited, you may want to check the Chicago Mercantile Exchange, which has tradable water futures. These contracts allow investors to speculate on the future value of the NASDAQ Veles California Water Index.
If you are new to futures, check out our guide on futures trading.
Alternatives to investing in water
- Investing in commodities
- Investing in metals
- Investing in oil
- Investing in precious metals
- Investing in silver
Summary: invest in water
Water is a scarce natural resource and only 1% of the water on the globe is readily available freshwater. Due to this, it can be a lucrative investment opportunity.
Hence, you can invest in water via stocks, funds, or futures to diversify your portfolio.
What are the benefits of investing in water?
Investing in water can offer both financial and ethical benefits. Water is a fundamental resource vital for life and various industries, making it a potentially stable investment. As demand for clean water grows due to population growth and urbanisation, investments in this sector could see positive returns.
Are there risks associated with investing in water?
Like any investment, there are risks. Regulatory changes, shifts in water availability due to climate change, and economic fluctuations can impact the water sector. Additionally, the performance of water-related stocks can be influenced by broader market trends.
What sectors are included in water investing?
Water investing encompasses various sectors, including water utilities, infrastructure, technology, and equipment. These sectors contribute to the management, purification, distribution, and treatment of water, presenting diversified investment opportunities.