Investing

The Liquid Asset: How Water Investments Can Shape a Sustainable Future

water
Credit: Photo by Anastasia Taioglou on Unsplash

Water is the world's most crucial natural resource, forming the foundation of economic prosperity and inclusive growth. As a finite resource with increasing global demand, it is estimated that 2 billion people (26% of the global population) lack access to safe drinking water, while and 3.6 billion (46%) lack access to safely managed sanitation. By 2030, water demand is likely to outpace supply by 40%, with nearly 700 million people under threat of displacement due to water scarcity.

With groundwater being the main source of around half of all household drinking water globally, and the agricultural sector accounting for 70% of the worlds freshwater consumption, increasing water demand exacerbated by the impacts of the climate crisis place the health and well-being of billions in an imminent global water crisis. This not only threatens social and environmental stability, but severely constrains global economic growth. To meet the 2030 UN SDG Goal 6 of ensuring access to safe water and sanitation services, financing a water-secure future must be at the top of investors agendas which aim for sustainable risk-adjusted enhanced outcomes driven by water, the world most abundant commodity and high demand natural resource.

The Blue Economy: Innovative Financial Solutions for Water Conservation and Sustainability

Around 70% of the earth’s surface is covered by water, with freshwater comprising only 2.5% of the Earth’s water covered surface.

With global water demand expected to increase by 55% between 2000 to 2050, and less than half of available freshwater easily accessible and usable, significant investment opportunities are emerging in the water and wastewater treatment market. This market will reach $956.48 billion by 2032, growing at a compound annual growth rate (CAGR) of 5.4 percent from 2022 to 2032. Driven by rapid urbanization, the urgent need for new water resources, and the growing demand for advanced water treatment technologies, delivering a secure and sustainable water future depends on innovative solutions that prioritize our water security and address the detrimental impacts from water scarcity related risks.

To bridge the water financing gap, roughly $114 billion per year is needed, which is three times more than the financing currently deployed towards resolving the global water crisis. Investors play a key role in bridging the water financing gap by investing in water as a theme and exploring opportunities in which technology can assist in reducing water usage, particularly in agriculture. The vast water-related investable universe holds numerous solutions to the water crisis, such as the 70 to 95% reduction in water usage of vertical farming, in comparison with traditional farming methods. By exploring growth opportunities in water-related investments, investors may be able to benefit from water as a unique, reliable diversifier to rebuild portfolio resilience and contribute towards a global water-secure future.

Actionable Insights: Accelerating Action in Water Investment Financing

Investors may gain exposure to water-related investments through the following actionable insights:

  • Diversify your portfolio with water-focused exchange-traded funds (ETFs)

Given the critical importance of water as a global resource, investors can take action by including water-focused ETFs in their investment portfolio construction strategies. These specialized ETFs comprise companies engaged in water infrastructure development, water treatment technologies, and water resource management. By diversifying their portfolio with water-focused ETFs, investors can contribute to the sustainable management of this crucial global resource while potentially benefiting from the continuous growth of the water industry.

  • Identify companies with innovative water conservation technologies and solutions

Investors interested in water-related investments can seek out companies that are at the forefront of developing innovative technologies and solutions for water conservation. Identify businesses that offer efficient irrigation systems, wastewater treatment technologies, water monitoring and management tools, or advanced water purification methods. By investing in these future-thinking companies, investors can support the advancement of sustainable water practices and potentially capitalize on the growing demand for such solutions.

  • Consider bonds issued by water infrastructure projects

Investing in bonds issued by water infrastructure projects can provide investors with an opportunity to support and finance crucial water-related initiatives. Municipal bonds, for example, can fund the construction or renovation of water treatment facilities, distribution networks, and reservoirs. These investments not only offer the potential for financial returns but also contribute to the development of resilient water infrastructure, helping to address water scarcity challenges.

The Water-Finance Nexus: Navigating the Path to a Water-Secure World

The future of our global communities, economies, and environment depend on bridging the water finance gap and investing toward water security to ensure a sustainable and equitable future. We must urgently reconsider how we value water, and the role it plays within a well-diversified investment portfolio. By placing water-related investments at the cornerstone of investment strategies, investors can shape a world of universal access to safe drinking water, safeguard the natural environment, and contribute to the advancement of water conservation and management practices. Adding water exposure to your portfolio and investing according to its true value transforms water into a catalyst for innovation and resilience, driving the transition of the global water crisis towards a water secure future.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Aisha Williams

Entrepreneur, futurist, and sustainability activist, Aisha is dedicated to reimagining the future of impact and sustainability as the Founder and CEO of ImpactVest. Recognized as a prominent emerging asset management firm and a member of the Council for Inclusive Capitalism, ImpactVest is committed to a mission that drives positive change.

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