The smart money is on water becoming the oil of the 21st Century, say a number of financial experts including Bloomberg News, MSNBC, and financial fund managers like the Calvert Global Water Fund (CFWAX).
“Water had been ‘essentially overlooked’ during the recent commodities boom, despite clear warnings over shortages that would require sizable investments to overcome,” says Philippe Rohner, manager of a water equity fund for the Swiss bank Pictet, in a September 18, 2006, article on PlanetArk.com titled, "Investors Bet on Rising Costs for Scarce Water."
“It is an industry that requires capital, and where the returns can be quite attractive for investors in equities,” he says.
Why Invest in Water?
The argument for investing in water is fairly straightforward. People need water to live. No one can get by without water to drink. That’s simple enough. Here’s another fact: It takes a lot of money to ensure that communities and people have water to drink. Infrastructure costs billions of dollars to build. Pipelines cost billions of dollars to install. In fact, the U.S. Environmental Protection Agency (EPA) projects that the U.S. will spend $500 billion over the coming two decades to refurbish public water supplies.
The United Nations estimates that about 1.1 billion people worldwide do not have access to fresh drinking water—and 2.6 billion do not have adequate sanitation systems. To meet this demand, Global Water Intelligence analysts expect the water supply market to grow about 20% in the next five years, and demand is especially strong in North Africa, the Middle East and China, says Christopher Gasson in an April 28, 2010, interview with the UK’s Guardian.
Stimulus Funds Make Water Investment Attractive
“We cannot ignore the arriving wave of infrastructure rehabilitation and replacement we will face over the next several decades. To do so would put the achievements of the last 30-40 years and our nation’s waters and public health at risk,” says the U.S. Environmental Protection Agency’s website.
To assure the U.S. water future, when Barack Obama signed the nation’s record-breaking $787 billion stimulus package, $6 billion was set aside for water infrastructure repair, river, and lake cleanup operations, as well as park restoration. It provided $4 billion for clean water projects and $2 billion for drinking water projects, according to a February 17, 2009, Circle of Blue Water News article titled, “Betting Green on Blue: What does the Stimulus Package do for Water?”
The Associated Press says that $6 billion is a mere down payment, not nearly enough to cover the billions of dollars needed to accomplish the EPA’s long list of historically underfunded work.
Public-Private Water Investment Opportunities
Private water suppliers are poised to grow as demand set to surge. Renewed growth is being driven by poor services and the need for huge investment to repair and expand supplies, which in a recession is even harder for governments and municipal authorities to fund, says the UK’s Gasson. It is also encouraged by less historical opposition to private suppliers in much of the big-growth regions, and the continuing "marketisation" of China, he says.
That's good news for companies like Itron (ITRI), Badger Meter (BMI), Tetra Tech (TTEK), Nalco Holding (NLC) and Roper Industries (ROP). PowerShares Water Resources Portfolio (PHO) believes its future will be positive as well. The same can be said for Aqua America (WTR,), with a market cap of $2.9 billion and Consolidated Water (CWCO), a Cayman Islands-based desalinization company with a cap of $318 million.
Further, Lee Conrad says in an April 30,2010 article on Financial Planning’s website titled “The Product Guru: Investing In Water” that the mutual funds dedicated to this area returned 45% for the 12 months ending March 31. (The 12-month period before that, it was down 38%.)
Bottled Water Investment Set to Boom
Water infrastructure isn’t the only place where water investors stand to make money. The bottled water industry is set to make huge profits. Here’s an example: A gallon of bottled water costs more than a gallon of gas. How can that be? Let’s say a 12-ounce bottle of water costs $1.25. Doing the math, that makes a gallon of bottle water cost around $13.33. Gas is on average $3 per gallon.
“As growing pressures combine to force investments in water infrastructure and technology of up to $1 trillion every year between now and 2030, water sustainability is likely to break through in 2010 as a mainstream issue for investors,” says Jens Peers, portfolio manager of the Calvert Global Water Fund (CFWAX) and head of Eco Funds for Dublin-based KBC Asset Management International Ltd.
To solve these problems, water-system infrastructure will need to be built or renovated, and technologies will have to be developed to purify and transport to people who need it, says Matthew Scott in an April 22, 2010, article on Daily Finance titled, “ Investing in Water Could Pour On the Returns.” And that presents powerful financial and investment opportunities for investors.
Kathy Jesperson - Kathy Jesperson is veteran journalist with more than 18 years’ experience. She has written about environmental health, water ...
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