Scarce and costly water resources gaining attention among investors.
In the face of growing water scarcity worldwide, investors are increasingly turning their attention to innovative water technology companies that are tackling this pressing issue. Here are some key companies and opportunities to consider.
California, responsible for a significant portion of the food produced in the USA, is currently experiencing water scarcity, which may lead to increased prices for various crops nationwide. This situation highlights the importance of investing in water-saving technologies.
One such company is Xylem (XYL), a leader in smart water technology. Xylem provides IoT-enabled smart pumps, sensors, and meters that help utilities reduce leakage and modernize infrastructure. Through partnerships with utilities globally, including Europe, Xylem is well-positioned for future growth in both regulated and unregulated markets.
Sensus, a Xylem company, focuses on IoT-enabled meters to track and reduce water leakages, making it an ideal choice for drought-prone regions.
California Water Service (Cal Water, CWTR) is another company aligned with water reuse mandates and smart meter technology, emphasizing regulatory-driven growth in water efficiency.
Irrigreen, a deep tech company, specializes in robotic irrigation systems that can cut water use by about 50%. This hardware-based solution offers significant water savings for outdoor irrigation.
Investors may also consider the Tareno Global Water Solutions Fund, an actively managed investment fund targeting companies innovating across the water value chain. This fund provides diversified exposure to water tech innovation, focusing on technology firms rather than direct water sources.
Emerging hard tech areas in water innovation include advanced water quality testing and monitoring, next-generation filtration and wastewater treatment, decentralized water systems enabling local reuse and efficiency gains, and digitization and automation to address utility financial and workforce challenges.
Investors may also explore ETFs like the SPDR S&P Water Index ETF (CGW) or actively managed funds such as the T. Rowe Price Water Resources Fund (PRWAX), which blend utilities, engineering, and technology providers in water management.
Climate change is also contributing to water scarcity, as seen recently in the Eifel region with more frequent heavy rainfall events. In California, the current heatwave and those of previous years have severe consequences for the local population, making it more challenging and time-consuming to combat wildfires. The challenge of water scarcity can be addressed through the use of modern and innovative technologies.
In Germany, the chemical industry had to temporarily reduce production and switch to land transport due to low Rhine river levels caused by climate change. Urban growth, intensive agriculture, and the expansion of hydropower are the main reasons for the growing water scarcity and declining water quality, according to the Swiss Federal Office for the Environment (BAFU).
Veolia Environment, a French utility company, handles sewage sludge disposal and contributes to sustainable water supply through recycling. The company is also active in wastewater management. Xylem Inc. manufactures water treatment facilities and is one of the world's largest pump producers.
In summary, long-term water scarcity investment opportunities lie in companies and funds innovating in advanced sensing and IoT technologies, smart infrastructure upgrades, water reuse and recycling, and deep tech hardware solutions like robotic irrigation. These firms offer resilience against regulatory, environmental, and infrastructural challenges tied to global water stress.
Roman Limacher, the CEO of Arete Ethik Investment, previously Hauck & Aufhäuser (Switzerland), which manages the Prime Values investment strategy with a focus on ethical investing, emphasizes the importance of investing in water technology companies. With the demand for clean water increasing due to demographic trends, these companies are poised to make a significant impact on the global water crisis.
- Recognizing the importance of addressing water scarcity, especially in drought-prone regions like California, investors should consider companies such as Xylem and Sensus, which provide IoT-enabled solutions for water management and leakage reduction, and California Water Service (Cal Water), which aligns with water reuse mandates and smart meter technology.
- As climate change exacerbates water scarcity, it's crucial to invest in companies offering innovative water technology, such as Irrigreen, which offers robotic irrigation systems, or Veolia Environment, a utility company that handles sewage sludge disposal and contributes to sustainable water supply through recycling.
- Opportunities for long-term investment lie in companies and funds innovating in advanced sensing and IoT technologies, smart infrastructure upgrades, water reuse and recycling, and deep tech hardware solutions like robotic irrigation. Examples include the Tareno Global Water Solutions Fund and the SPDR S&P Water Index ETF (CGW), which provide diversified exposure to water tech innovation.
