While that is lower than the S&P 500’s 12% annualised return, these are still attractive returns for those who want to make a long-term bet on water, he said.Īmong the strongest individual stocks in Fahy’s portfolio, American Water Works, a wastewater utility holding company and Danaher Corporation, a global science and technology company, are both up more than 121% over the last five years. The S&P Global Water Index, which tracks 50 companies from around the world that are involved in water-related business, has a five-year annualised return of 8.1% and a three-year annualised return of 7%. While still a long-term play - this issue is only ramping up -an investor can get decent returns today.
Those who want to learn more about businesses in the sector should read Global Water Intelligence, said Dray, a trade publication that covers the industry. That could be construction companies that are building desalination plants, infrastructure operations that are working on dams and water treatment centres in developing countries and technology companies that are trying to find ways to make water cleaner. The easiest way to make money off the crisis is to own the stocks of companies that are involved in improving water quality, Fahy said. That’s where the investment opportunities come in. To avoid conflict, governments will eventually have to address the shortage. And, as the global population increases, even water-rich countries, like Canada, Russia and Brazil, will encounter problems, Dray said.
Other locales, such as India, Australia, Israel, Jordan, the United Arab Emirates and parts of Africa are also dealing with water shortages. To fix its water infrastructure woes, China will need to spend trillions, according to a 2013 McKinsey & Company report. China’s urban population is expanding quickly - the United Nations estimates that 292 million people will move into the country’s urban areas between 20 - putting pressure on existing water infrastructure in these area, Dray said.Īs well, China’s water supply comes mostly from rivers and lakes, about half of which are polluted, Dray said, with most of China’s usable water located in the south, while much of its population lives north. “Without debate, it’s the worst there,” he said. While California’s ongoing drought remains a pressing concern in America, China is in even greater trouble, according to Deane Dray, a managing director at RBC Capital Markets and an advisor to the United Nations on water issues. Pollution, growing populations and increasing demand for water - for use in everything from agriculture and energy production to health care and manufacturing - has reduced the clean water supply further. Desalinisation plants, which convert salt water (97% of the world’s supply) to clean water, are still expensive to build. Only 1% is consumable by humans, according to the US Environmental Protection Agency. The problem isn’t that there’s too little water on the planet, it’s that there’s not enough clean fresh water to go around. While the market is still growing, already some water-related stocks have garnered returns north of 100% and it’s likely the opportunities - and returns - will increase as the sector matures, Fahy said. “You can also live without oil and fossil fuels, you can’t live without water and that’s part of the reason for the investment case - the sheer importance of the thing.” “The supply of water is fixed and you can’t make more of it,” Fahy said. Solar and wind power, on the other hand, are growing alternate sources of energy. In some ways, water is an ideal sector for investment, as unlike oil, water can’t be reproduced and everyone needs it to survive, Fahy said. Fahy, an investment strategist and chief economist with Kleinwort Benson Investors, a Dublin-based investment firm, has made a career out of studying - and investing in - water.
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