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  • Writer's pictureMohamed Soltan

Clean Water Solutions: 5 Investment Opportunities in Sustainable Water Management

Fresh water is one of our planet’s most important resources. It is only 2.5 percent of the portion of the open water on the Earth's surface, and about half of that is either inaccessible or unusable.

A quarter of the world's population doesn't have access to enough safe drinking water, and almost half can't rely on public health programs to provide safe sanitation services. Population growth, pollution, and climate change are making the situation much worse, much faster. By 2030, experts predict that 700 million people will have to leave their current homes and relocate because of water scarcity.

Humankind desperately needs innovative solutions that reduce water usage, prevent degradation, and treat water. It's projected that an annual investment of $114 billion will be necessary to ensure global water security. This is more than three times the amount of capital currently at work. The shortfall represents an opportunity for investors, especially those with impact mandates.

We need clean drinking water to survive, and agriculture and industry both rely on it to produce our food and all the manufactured goods we use daily. Sustainable water management is ripe for disruption and investment. However, knowing how and where to invest can be challenging. Understanding how water is used in different sectors is a good entry into the concept of water investment. From there, you can better familiarize yourself with current innovations.

1. Agriculture

Agriculture accounts for more than two thirds of global water use. Water-conscious production methods like vertical farming that can reduce that amount significantly. Technologies like AI and precision engineering are being combined to monitor conditions like soil temperature and weather and adjust irrigation accordingly. They make sure minimal water is wasted but crops still get what they need, when they need it. Using solar-powered pumps to procure safe and reliable water for both livestock and crops is becoming the norm.

2. Semiconductors

Semiconductors are used in many electronic devices, including computers, scanners, cell phones, and electric vehicles. They're used in wind turbines, solar farms, and medical devices like pacemakers and insulin pumps. Unfortunately, manufacturing semiconductors requires significant quantities of high-purity water. The process involves several rinsing and cleaning cycles.

The slightest impurity can render an entire batch useless, and on the other hand, there are heavy penalties for failing to adhere to wastewater regulations. This means that extremely sophisticated plumbing and treatment systems are needed, including ultraviolet disinfection. Developing cost-effective, scalable solutions will give investors a competitive advantage.

3. Mining

The mining sector is increasingly under scrutiny for its intensive use of water. Unlike semiconductor production, it doesn’t require high-purity water, but even sources of surface and groundwater are increasingly restricted and costly to obtain. Pioneering companies are seeking novel methods for recycling water and even desalinating seawater. New water-free extraction and ore processing techniques are also being investigated. Wastewater pollution and carbon emissions remain a challenge, however, so we need to invest in more energy-efficient and less toxic solutions.

4. Healthcare

Water is essential in the healthcare industry. It is used to treat wounds, clean equipment and facilities, prepare solutions during the diagnostic process, and manufacture pharmaceutical products. The industry creates a massive demand for water maintenance systems for a variety of water qualities, including sensor equipment. Nanofiltration, ultra-violet treatments, and reverse osmosis are increasingly being applied to address the water needs of healthcare.

5. Food and Beverage

The food and beverage industry relies on high volumes of purified water for use in production processes and as an essential ingredient of outputs. In addition to meeting sustainability goals, efficient water use drives operational efficiency. Consumption has been reduced and even replaced in some instances by using smaller spray nozzles and cleaning glass containers with air rinsers instead of water. Water is being conserved by capturing and condensing steam produced in cooking processes.

The Future of Water-Related Investment

Several indices track water-related investments, including the Dow Jones US Water Index, the S&P 1500 Water Utilities Index, and the S&P Global Water Index. They monitor stocks of companies in industries directly tied to water (irrigation, utilities, water treatment). If holding direct stock isn't to your taste, there are EFTs, mutual funds, and UITs explicitly geared at water-based investments. And it's also possible to bet on the future price of water via tradeable water futures.

Water will play an increasingly important role in the future well-being of global communities. We need to invest in its security. Water-related investments are a cornerstone of a well-balanced, diversified portfolio.

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