Happy
World
Water
Day!
Water
is
often
taken
for
granted
but
with
demand
rising
and
scarcity
increasing
in
the
era
of
climate
change,
it’s
clear
that
the
prudent
management
of
water
is
key
to
humans
in
the
coming
decades.
But
is
it
an
investible
opportunity?
Water
cannot
be
considered
a
commodity
like
any
other,
exhaustible
but
still
replaceable.
With
climate
change,
population
growth
and
changing
lifestyles
in
many
emerging
countries,
the
focus
on
the
water
sector
has
steadily
increased
over
the
years,
precisely
because
the
preservation
of
water
resources
will
be
one
of
the
key
challenges
of
this
century.
Water,
Always
Needed
But
Hard
to
Access
According
to
the
latest
UN
World
Water
Development
Report,
water
use
has
increased
globally
by
about
1%
a
year
over
the
past
40
years
and
is
expected
to
grow
at
a
similar
rate
until
2050.
There
are
about
1.4
billion
square
kilometers
of
water
on
our
planet,
but
only
3%
of
this
is
fresh
water:
moreover,
most
of
this
fresh
water
is
glaciers.
Thus,
approximately
0.5%
of
the
total
water
is
adequate
to
meet
human
needs.
Due
to
transport
and
accessibility
difficulties,
with
population
growth,
water
supply
and
demand
will
become
more
unbalanced
between
regions,
to
the
disadvantage
of
arid
areas.
Therefore,
the
management
of
water
sources
and
the
efficient
distribution
of
water
will
be
an
increasingly
important
activity
in
the
future,
especially
in
developing
countries.
As
access
to
clean,
potable
water
becomes
increasingly
scarce,
a
thematic
investment
opportunity
presents
itself.
Water
contributes
significantly
to
sectors
such
as
agriculture,
food
production
and
even
semiconductor
manufacturing.
Given
the
central
role
it
plays
in
many
sectors,
the
opportunity
to
invest
in
water
is
reinforced
by
its
growing
demand
and
unstable
supply.
On World
Water
Day
–
an
anniversary
established
by
the
United
Nations
in
1992,
with
the
aim
of
focusing
attention
on
the
importance
of
fresh
water
and
supporting
the
sustainable
management
of
scarce
resources,
addressing
the
global
water
crisis
–
we
decided
to
analyse
investment
opportunities
in
this
sector
and
the
characteristics
of
mutual
funds
and
ETFs
exposed
to
the
theme
of
water
management.
Funds
for
Investing
in
Water
Currently,
the
Morningstar
Equity
Sector
Water
category
has
around
50
open-ended
mutual
funds
and
ETFs
domiciled
in
Europe.
The
table
below
shows
the
10
largest
by
assets.
Last
year,
European
sustainable
funds
experienced
net
outflows
for
the
first
time,
particularly
those
labelled
as
Article
8
under
the
SFDR.
Identified
mostly
as
sustainable
funds,
water
sector
equity
strategies
also
recorded
net
redemptions
in
2023
(€1.5
billion,
£1.29
billion),
essentially
all
concentrated
in
the
last
quarter
of
the
year.
Especially
suffering
in
this
respect
were
the
Pictet
Water fund
(the
largest
in
the
category
by
assets),
with
€800
million
withdrawn
by
investors
in
2023,
the
Fidelity
Sustainable
Water
&
Waste
Fund
(€630
million
net
redemptions)
and
the
RobecoSAM
Sustainable
Water
Equities,
with
€480
million
of
net
outflows.
Despite
outflows,
category
assets
rose
slightly
during
2023.
At
the
end
of
February,
these
funds
managed
a
total
of
€30.1
billion
at
European
level,
when
five
years
earlier
the
assets
were
only
€12.6
billion.
These
strategies,
like
all
thematic
funds,
experienced
great
popularity
during
the
covid
pandemic,
as
between
March
2020
and
December
2021,
assets
under
management
jumped
from
€14.8
billion
to
€35.3
billion.
Water
Funds
–
Might
Need
Diluting
Investors
wishing
to
invest
in
water
funds
should
remember
that
these
portfolios
can
be
quite
concentrated
and
should
be
used
wisely
as
part
of
a
diversified
portfolio.
As
an
example,
the
Amundi
MSCI
Water
ESG
Screened
UCITS
ETF
invests
in
only
33
companies,
with
the
top
10
names
accounting
for
65%
of
assets.
In
contrast,
Pictet’s
strategy
–
among
the
most
diversified
–
has
75
names,
with
the
top
10
weighing
in
at
37%
of
the
portfolio.
Since
it
is
difficult
to
invest
directly
in
water
rights
or
to
have
direct
exposure
to
the
price
of
water,
water
sector
equity
funds
mainly
invest
in
water
utilities,
water
transportation
companies,
companies
that
produce
water
treatment
and/or
purification
equipment
and
companies
that
can
be
considered
leaders
in
water
efficiency.
Among
the
most
prominent
names
in
the
portfolios
of
these
strategies
are
Xylem
Inc
(XYL),
Pentair
PLC
(PNR),
American
Water
Works
Co
Inc
(AWK),
Tetra
Tech
Inc
(TTEK),
Ecolab
Inc
(ECL)
and
Ferguson
(FERG).
“The
water
sector
sits
comfortably
at
the
intersection
of
climate,
nature
and
social
issues,
creating
investment
opportunities
for
all
sustainability-oriented
investors,”
explains
Deepshikha
Singh,
head
of
stewardship
at
La
Française
AM.
“Most
investments
in
the
water
sector
have
so
far
focused
on
services
that
meet
the
public
demand/need
for
water.
However,
there
are
many
established
companies
and
new
start-ups
that
are
working
to
solve
water
security
problems
using
innovative
technologies
and
solutions.
According
to
several
studies,
the
addressable
global
market
opportunity
for
the
water
and
wastewater
industry
is
estimated
at
between
$700
and
$800
billion,”
she
says.
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