Institutions are starting to make a splash in the $600bn water industry, but the thirst for capital is stronger than ever. Mark Dunne looks at why investors should adopt an H2O strategy.
“There are other things that you could use instead of oil, but there is no substitute for water.”
Faith Ward, Environment Agency Pension Fund
Water covers almost three-quarters of our planet yet there’s not enough of it to meet demand. The problem is not that fresh water is rare; it’s that it’s getting rarer.
In just eight years from now two-thirds of the world’s population will be living in water stressed conditions, the UN believes, up from a fifth in 2014. Adding fuel to the fire is a forecast 50% hike in demand for H2O by 2030, the result of population growth and rising prosperity in the emerging markets.
Such a spike in demand could see water replace oil as the world’s most sought after and expensive resource. This would be thanks to one crucial difference between the two.
“There are other things that you could use instead of oil, but there is no substitute for water,” says Faith Ward, the Environment Agency Pension Fund’s chief responsible investment and risk officer.
Science is yet to find a way of making water. If it could, it would be the “Holy Grail”, says Simon Gottelier, senior manager of Pictet’s water strategy. “It would be hugely challenging and probably very, very expensive,” he adds.
Limited supply and rising demand will tick boxes on many fund managers’ checklists due to the huge investment opportunity that the imbalance has created. The current water investment market is believed to be worth between $500bn and $600bn (£483bn). This, according to Gottelier, is growing at 5% to 7% a year.
