People need fresh water to live; manufacturers need fresh water to produce; and economic growth is dependent on abundant fresh water supplies. Water is essential for moving waste, keeping us and the environment healthy, as well as for producing food, clothing, and iPhones. Yet, most people in the developed world don't give much thought to their daily water use. Contrast this with people in developing nations, where access to safe drinking water can be an ongoing struggle. In much of the developing world, fresh water is either hard to come by or requires arduous work or substantial financial means to get. The United Nations predicts that by 2050, two-thirds of the world will be “water stressed,” with close to two billion people living in countries facing water scarcity. In fact, millions already die each year from largely preventable diseases caused by a lack of access to clean water and proper sanitation.
The amount of fresh water on the planet has remained fairly constant over time as it is continuously recycled through the atmosphere, until very recently. The earth’s population has exploded and is expected to increase by another 20% to 30% over the next few decades. This means that competition for clean water is intensifying on an exponential basis. Unfortunately, humans have proven to be inefficient water users. According to the United Nations, water use has increased at more than twice the rate of population growth in the last century.
Competition for fresh water is already fierce in the commercial sector. Agriculture claims the bulk of fresh water worldwide, soaking up around 70%, and industrial uses consume another 22%. The remaining 8% goes to city and home use. Furthermore, new research indicates that the world’s unquenchable thirst for fresh water is causing sea levels to rise faster than they otherwise would due to climate change. Trillions of gallons of water pumped out of underground aquifers, rivers, and lakes are reaching oceans through rivers and evaporation from the soil.
As the fresh water deficit rises, companies that offer viable solutions may spell opportunity for investors. Many corporations are already working to address the fresh water deficit. Investors who are aware of the issues may be better informed and better positioned to manage the risk and opportunity of the fresh water deficit.
Tony is Senior Portfolio Manager with Portfolio 21 Investments. He has 15 years of experience in the field of investment management.