Asset Management

Mind the gap – Water supply and demand are out of balance

Sustainable Investing

“Water, water, everywhere, / Nor any drop to drink” – this was the situation in which the protagonist of Samuel Taylor Coleridge’s “Rime of the Ancient Mariner” found himself in back in the 18th century. After shooting an albatross – an omen of good luck among sailors, as it is “the bird that makes the breeze to blow” –, the tide turns for Coleridge’s antihero: the vessel is becalmed and the crew is about to die of thirst. As punishment for killing the innocent bird, the sailor is forced to wear its carcass around the neck. Salvation is only found after he starts to get more in tune with nature again. As the sailor appreciates the beauty of some nearby sea snakes, the dead bird falls off, glides into the ocean, and the voyage is continued.  

Fast forward some hundred years, not that much has changed. According to WWF, only 3 percent of global water resources is freshwater, two-thirds of it in frozen or otherwise unavailable form. Over the course of the past century, water use has been growing more than twice as much as the world population –, we also engage in practices like deforestation, which only acerbates the supply shortage. As of today, an estimated 1.1 billion people worldwide lack access to water, and 2.7 billion struggle with water scarcity at least one month per year.

Facing an abundance of possibilities, investors should focus on distinct segments

While keeping an eye on our own water consumption is an important first step, we believe we need to allocate resources to solve the problem. By investing in companies which tackle water-related issues such as water scarcity and water contamination, investors may not only reap positive environmental and social rewards such as enabling people access to clean water and sanitation, but also financial returns. There are many possibilities, including water extraction and storage, water infrastructure and water efficiency.

Desalination: taking water scarcity without a pinch of salt

Desalination strips saline water off its mineral components and plays an important role in expanding the supply of drinking water. For water-scarce regions such as the Middle East, desalination is indispensable. Saudi Arabia, for example, is the world’s largest producer of desalinated water and generates around 50% of its drinking water with this technology. The kingdom’s recent decision to assign Spanish company Acciona – a leader in Reverse Osmosis sea- and brackish-water desalination – with building yet another plant shows that demand is still far from saturated. The Madrid-based firm operates more than 80 desalination plants in which it produces over 4.1 million m3/d, supplying water to more than 22 million people.

Another example is Australia. Until the turn of the millennium, the world’s driest habitable region had relied solely on water stored in dams. Then came the 2000s drought, and changed the country’s water industry forever. Back then, low rainfall led to a severe drop in dam levels. The drought wreaked havoc across the country, causing widespread crop failures, livestock losses and bushfires. In order to prevent this from happening again, state governments started to build desalination plants all over the country. These plants, initially considered to a fall back option which could be switched on and off, have turned into an integral pillar of Australian’s water supply.

Water leakage and prevention: stopping the drop that makes the vase overflow

Water leakage and prevention depicts another interesting, yet often overlooked investment opportunity. As a staggering 46 billion liters of treated water are lost every day, narrowing down a leak’s origin as fast as possible is crucial. This is where firms like Utilis Corp, a private non-listed Israeli company, come into play. Utilis uses satellite technology to detect underground leaks from space. The satellite imagery enables to cover 3’500 square kilometers at once and fosters a fast identification of the leak. After confirming the findings on-site, dedicated professionals mark the affected pipe and excavate it for repair.

Also in 2020, we are finding ourselves in hot water

Today’s World Oceans Day serves as a reminder that our very own albatross has not yet slid into the ocean. Despite all efforts, population growth and increasing standards of living prevent us from curbing our high water consumption. By 2030, water demand is expected to increase by 40 percent. Against the backdrop of over 2 billion people living in water-stressed countries already today, we still have a long journey ahead of us. We believe that companies dedicated to address these problems offer new opportunities to investors looking for attractive performance while creating a positive impact.

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World Bank Group, The Role of Desalination in an Increasingly Water-Scarce World, March 2019