Investing in water

Where do you find all the water on Earth?

The scarcity of water – and clean water in particular – is also apparent from a study published by the World Health Organization (WHO) in 2019. Worldwide, 785 million people do not have access to clean water and 2 billion people use water contaminated with feces, which leads to around 800,000 deaths per year. 

In the same study, the WHO states that by 2025, half of the population will live in a 'water stressed area'. Either an area where the demand for water exceeds the amount available for a period of time, or where poor water quality limits its use. The industry sector is an important factor here - many production processes require (fresh) water and that puts pressure on the available amount of (clean) drinking water. Water consumption for industry also makes up about 20% of total water demand worldwide.

The changing climate has a clear relationship with water. In recent years, we are increasingly confronted with extremes. From prolonged heat and drought, to floods and landslides, this leads to a lack or abundance of water, resulting in food shortages and/or severe problems. 

In short, there is plenty to do and read about water, and perhaps because of its scarcity, 'water' as a theme can also offer opportunities for investors. 

Investing in the 'water' sector with an international spread

Those who delve deeper into the theme of water will find companies that are involved in water distribution and management, purification, demand efficiency and issues relating to water and food. There's enough variety for those who are interested in individual shares, but there are also diversified choices.

For an international diversification investment, the iShares Global Water UCITS ETF (ISIN: IE00B1TXK627 ) can be found on the German stock exchange with the ticker 'IH2O'. The fund physically invests in global equities in the 'water' sector and currently has 50 stocks in its portfolio. The ongoing charges are approximately 0.65% per annum and the fund scores five stars via Morningstar.

Notably, the fund also has a Morningstar Analyst Rating™ of Silver, investing in equities that score well on sustainable business practices and have a smaller CO2 footprint than their peers. Overall, the fund scores three globes for the Morningstar Sustainability Rating™. The dividend yield is between 0.75% and 1.5% on an annualized basis and is generally paid semi-annually in May and November. 

The main risks? There is currency risk - as mentioned, the fund is denominated in euros, but there are many foreign companies within it. Of course, you also run market risk. When financial markets are under pressure, water related stocks will experience that pressure too. In a nutshell, the fund would be interesting for long-term investors who can and want to bear equity risk and who want to 'quench their financial thirst in the stock market' with part of their portfolio. Click here for more information about the iShares ETF.

Please remember that investing involves risk, historical performance is not a guarantee of future of returns and your investments may lose value.