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INVESTING IN WATER

What You Should Know

Fresh water has no substitute, which is why it’s impossible to talk about impact investing without also talking about investing in water. A global supply/demand imbalance is causing water to be viewed as a core commodity, much like oil. For sustainable investors and the world, this creates a flood of opportunity.

Understanding Water Supply Limits

Water is everywhere. From an aerial view, it would seem like there’s more need for land than water. After all, the world is about 71% water. So how is it that we’re “running out”?

Because most of the world’s water is saltwater (91%) rather than the freshwater needed for so many of our daily uses. To increase water supplies currently takes other processes, each with their own ecological opportunities and challenges.

It may be surprising, but drinking water is actually the smallest use of water. This is true not only because clean water is used elsewhere in larger amounts, but also because billions of people still don’t have access to clean water and managed sanitation. As the global population continues to grow and industries grow to meet demand, the usable water supply will shrink. In fact, more than 40% of the world is projected to be living in severe water stress by 2050.

As shown above, the world has a water problem. There is clear evidence that groundwater supplies are diminishing, which are about 30.1% of our freshwater resources. According to NASA, as far back as 2015, 21 of the world’s 37 largest aquifers are being depleted, with 13 in severe distress.

Investing in Water | What You Should Know | WalterSchindler.com

Where is the Water Going?

Are we just drinking it all? The largest use of water resources, in fact, is in our agricultural activities. Most of that water is used for irrigation. Crops such as wheat, corn, rice, cotton and sugarcane use a large amount of water during the growing period.

After that, according to the Bureau of Reclamation’s Water Facts, are other industries, such as textiles, the beverage industry and automotive manufacturing. Each industry needs a steady supply of fresh water, rather than saltwater.

Finally, there’s domestic use, which is anything we personally do with it: drinking, washing, flushing, etc. This is the smallest amount of global use, at approximately 11%.

Unsurprisingly, the amount used per country is directly in correlation to the population. China uses approximately 362 trillion gallons a year. The U.S. and England use 216 trillion gallons and 20 trillion gallons a year respectively.

Population Numbers and Water Consumption: SmarterBusiness.co.uk
Population Numbers and Water Consumption: SmarterBusiness.co.uk

The Water Problem: Limited Supply + Chronic Underinvestment

Obviously, the world has a water problem. The supply of freshwater is shrinking. Meanwhile, thanks to melting glaciers and thermal expansion, the amount of saltwater is growing: sea level continues to rise at about one-eighth of an inch per year.

Out of the need to feed 7.7 billion people and growing, we can’t stop irrigation. Millions of people would lose jobs to shut down automotive factories or beverage makers. We need textiles to have warm clothes to wear during the cold months, among other uses. In other words, we can’t shut down the world to delay the loss of our freshwater resources.

Chronic Underinvestment

While there is a rise in impact investing overall, there is also a case of chronic underinvestment in water-related processes and the water industry in general. Even though water-related losses in agriculture, health, income and property were estimated to be about $260 billion per year (WHO, 2012) because of inadequate water supply and sanitation, significant headway is still lacking. Despite growing water-related risks, sustainable water infrastructure projects and management resources suffer from a lack of investment worldwide.

What are our options? How can we reduce the loss of freshwater without also reducing production?

The Water Solution: Investing in Water Innovations and Infrastructures

The answer, or answers, is already in the works. Water innovations and infrastructure are key areas of sustainable impact investing and have been a focus of Dr. Schindler’s investing activities for over 10 years.

For example, in 2006, with only $4 million from SAIL Capital and $7 million from Dow Chemical Venture Capital, WaterHealth International Inc. launched what is now the world’s leading provider of pure drinking water systems to rural villages. WaterHealth serves over 7 million people per day in Africa and India with their solar powered water systems.

Learn About WaterHealth

A Flood of Investment Opportunity in 2020

Investing in water should be one of the top three concerns for sustainable investors. Investments are still needed along the entire water chain, from better options for water utilities to more available drinking water and beyond. This is true even though market opportunities in the water sector are expected to reach $1 trillion by 2025.

For instance, benefit-cost ratios for investments in sanitation services in 2020 average about 5.5 globally, and approximately 2.0 as a global average for improving drinking water.

Further Reading: United Nations World Water Development Reports

Trillions have been invested in sustainability areas such as reducing greenhouse gas emissions. Green technology, clean energy, and low-carbon technology have been big on the investment budget. However, investing in water has been a missed opportunity. Here are a few examples:

Expanding the Water Supply

Why?

Billions still have inadequate access to water

Solution

Develop new water infrastructure to create a sustainable, reliable and cost-efficient supply system for developed and developing nations

Opportunity

  • Exploration costs, engineering and design
  • Well drilling
  • Runoff water-capturing facilities
  • Pumping stations and pipelines
  • Desalination equipment
  • Wastewater treatment plants for reuse or discharge
  • Construction materials

Increasing Water-supply Efficiency

Why?

Water-supply systems lose 32 billion cubic meters of treated water every day

Solution

Create effective solutions to reduce demand, lessen the need for capital-intensive solutions and promote sustainable use of available resources

Opportunity

  • Irrigation equipment to prevent evaporation of water in farming
  • Meters to stop waste
  • Drought-resistant crops or fertilizers
  • Automation controls
  • Leakage detection

Improving Water Quality

Why?

80% of China’s rivers are too toxic for fish—let alone human consumption

Solution

Increase regulations on drinking-water quality and establish minimum levels of treatment

Opportunity

  • Filtration
  • Monitoring and testing
  • Disinfection chemicals
  • Sanitary appliances
  • Wastewater technology

Creating Consumer Projects

Why?

Innovation in wastewater technology for facilities and consumers is necessary to help increase water efficiency

Solution

Invest in wastewater technology and recycling

Opportunity

  • Producing business and consumer level products that are environmentally aware or neutral

Return on Investing in Water

Growth of Water Investments | WalterSchindler.com

A hypothetical $1,000 investment in the S&P Global Water Index at inception (11/16/2001) would have grown 357%—far outpacing broader stock-market indexes.

 

Water Indexes | WalterSchindler.com

Water infrastructure projects continue to be a large part of Dr. Schindler and his firm’s focus, including desalination, irrigation systems, water purification, wastewater purification, and hydropower infrastructure. Water innovations feature heavily not only as investments, but also in his role as a sustainability advisor.

Join Dr. Schindler and Transformation LLC in investing in water innovations and infrastructure projects that make a difference. Contact him on his firm’s website to discuss your investment project.

Thousands have lived without love not one without water. – W.H. Auden