Vontobel Aqua Index – sustainable returns with an environmental and social impact

Vontobel Aqua Index – sustainable returns with an environmental and social impact

09 November 2020Reading time: 3 minutes

Water supply is inadequate in many parts of the world, which presents us all with great challenges. By investing in companies that develop technologies to counteract the increasing water shortages don’t just offer investors attractive returns. They can also be a part of the solution to this far-reaching problem. A certificate on the Vontobel Aqua Index can therefore offer an interesting investment opportunity.

 

The human population is facing one of their biggest challenges. One of these challenges is the already very difficult water supply in many areas of the world. Water consumption is rising steadily but the supplies of it are limited. Although the oceans are filled with this natural resource, only 1 in every 1000 litres of water is suitable for drinking. It is estimated that around 1.1 billion people in the world already have no access to water and around 2.7 billion face water shortages at least once a month.

Not only global warming, which is changing precipitation patterns but also increasingly outdated infrastructure, urbanization and increasing living standards are all reasons why water supply could become even more difficult. The OECD estimates that the worldwide consumption of water will have risen by 55% by 2050, making water supply increasingly difficult. In order to combat this change, urgent investment is necessary in the world’s water supply.

Three ways to combat the effects of water shortages

Nowadays there are several ways to deal with these problems: Water extraction and storage, water efficiency and water infrastructure.

Water extraction and storage

Desalination and the use of abundant salt water which is in our oceans could be a way to counteract water scarcity. Further investment should also be made in the groundwater extraction as well as surface water storage.

Water efficiency

It is essential to limit the any water waste. This can be achieved on the one hand through more efficient water use – for example in agriculture with modern irrigation systems – as well as through more advanced monitoring and preventing leaks in water pipes.

Water infrastructure

Providing better water infrastructure is also a major area in the coming years and decades to address water scarcity. All over the world, we need to build water works and upgraded treatment processes for the provision of drinking water. We should also be building new water pipelines as well as plants for wastewater treatment. Especially in emerging countries such as China or India, which have experienced rapid economic growth in recent years, it will now be important to ensure better water quality by investing heavily in wastewater treatment and solving the problem of water contamination.

Investing opens up opportunities

The global market for water is currently lying at around USD $600 billion a year. In order to counteract the water shortage and sustainable investment issues such as this are increasingly becoming the focus of investor awareness, the market volume could even increase. This may create investment opportunities in companies that offer products or solutions to improve water supply, increase efficiency in water use, or enhance water quality.

By investing in companies that offer innovative and marketable solutions to address water scarcity and pollution, investors could not only support environmental and social goals, such as improving people's access to clean water and sanitation, but also benefit from potentially positive company developments.

Aqua Index

The Aqua Index specifically includes stocks of companies that operate in the water sector and could benefit from water-related trends. The selection includes companies from the three thematic areas: Water Extraction and Storage, Water Infrastructure, and Effective Water Use.

The approach to stock selection is multifaceted. The selection process begins with a universe of listed companies in major markets. What follows is then quantitative filtering to identify companies active in the water sector. The next step is a fundamental company analysis and an analysis of the long-term prospects of the business model. For the final selection, Vontobel's Global Quality Achievers model, including environmental, social and governance (ESG) criteria, is also taken into account. The Aqua Index includes 20-30 companies and the index composition is reviewed at regular intervals.

Years of expertise in the area of investment solutions

Vontobel is considered to be one of the pioneers in the field of ESG investing - clients and investors have been able to benefit from Vontobel's sustainable investment solutions since the 1990s. More than 25 years after launching the first sustainable investment solution, we at Vontobel are still taking the initiative to talk about the challenges ahead, but also to show our clients how this historic transformation process is creating unique opportunities for investors.

This long-standing expertise in the field of sustainable investments is incorporated into the Aqua Index. The Vontobel experts who manage the Aqua Index have specifically selected securities that meet ESG criteria for the index composition. Investors in the Aqua Index can therefore make the investment knowing that they are helping to combat one of the biggest problems facing humanity.

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28/09/2021 04:25:23

 

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