In this article you will not read things like “how to invest in water”, “invest in water by buying stocks or bonds”, “water ETFs to invest in”, “investing in water with CFDs”, “trading on water”: that would be just repeating things that are the same for every type of investment, water or commodities or all the rest. Instead I want to explain “why invest in water”, in one way or another, because water investments are a megatrend for the future that has already begun.
Water is not only an indispensable resource for our body and for living organisms, but also for most of the economic and productive activities. Just think for example of the agricultural sector (which absorbs around 70% of consumption), the energy sector, the textile sector, just to name a few. Water makes up about 74% of the earth’s surface but only 1% is drinkable water; this, unfortunately for many inhabitants of the planet, is already a very important factor to consider in investments. An investment opportunity for a much more sustainable future and which could be a valuable resource for increasing the diversification of the investment portfolio.
Investing in water: the time is now
For some years now, the concept of water management has also been spreading among the top management of multinationals (for example Coca Cola, Nestle and Kellogg’s) who are gradually equipping themselves with ad hoc programs for a more efficient and ecological management of this precious asset through the investment of large sums of money.
The fact that the management of water and the infrastructure for its distribution is increasingly important (it is an ESG factor of sustainable finance) is demonstrated by the fact that it also affects the governments of many countries. The European Investment Bank (EIB) has been, and continues to be, the largest source of funding for the global water sector. A report published by the OECD points out that by 2030 most of the countries’ investments will be concentrated in water infrastructure for an amount of about $ 18 trillion.
This is why investing in water is already a great opportunity for small investors: investments in water will increase dramatically, entering this sector now can guarantee substantial profits.
How to invest in water
I swear, I’m not fooling you and I confirm what I wrote in the introduction. I only give some initial information to give an idea of how water has become an asset to invest in.
Water is an essential natural resource with no substitutes, but historically it has not been given the right price by the markets and its sector has old and underfunded infrastructures. For these and other reasons, in March 2008 the investment bank Goldman Sachs called water “the new oil”.
Like oil (and almost all other resources), water has also been “transformed” into a financial product and can become a resource for a properly diversified investment portfolio. Obviously there is a global financial index representative of the sector, the S&P Global Water Index, which has grown almost on a par with the stock market in the last decade, with an average annual return – in dollars – of 8.12%.
How investments in water will evolve in the coming years
Investments in water will materialize in two different directions and are already bringing important results:
- increase production: a goal that may seem difficult, but which today, thanks to the important technological progress of recent years, no longer seems unattainable. The diffusion of desalinators, industrial plants capable of removing salt from marine waters and making them drinkable, will be important. These solutions open new frontiers and try to respond to the growing need for water, especially for emerging countries that still do not reach minimum water standards
- reduce waste: another “vice” to fight and which requires a great economic effort. In fact, almost all countries in the world need to update their water distribution and use infrastructures (for example, in Italy it is estimated that almost 50% of drinking water is lost along the old and worn pipes). An Israeli technological innovation should be noted: drip irrigation devices, which allow you to precisely water the desired plant or the useful portion of land, thus avoiding waste and excessive consumption of an increasingly limited resource