Water as a source of return? Investments are in demand – and are being rewarded

In some places, water is taken for granted. However, the water supply in many regions of the world is inadequate, and the problem is much more far-reaching than often assumed. Waste, pollution, inefficiencies, demographic trends, and global warming are all reasons that are contributing to the situation. New technologies and infrastructure to counteract the problem are more in demand than ever. This could also open up interesting opportunities for investors.

Facts and figures at a glance

"Around the world, some 2.2 billion people lack access to clean drinking water - and 4.2 billion people - about 55% of the world's population - lack access to safe sanitation. About four billion people live in regions that experience high water scarcity at least one month per year." The global consumption of water is increasing by about 1% a year - but that growth is matched by limited supply. Those are alarming figures, according to UNESCO's World Water Report 2021, which was commissioned by the United Nations.

Although we live on a planet that is about three-quarters covered by water, the supply of water is severely limited and faces growing demand. Of the total water supply on earth, only about three percent is fresh water - and not all of it can be used, since a large part is still bound up in snow or glaciers. The possible consequences? Water shortages, in all regions of the world. This should make it clear that investments in infrastructure, research and modernization are urgently needed to counteract this increasing water shortage.

Today, various approaches already exist to counteract the steadily increasing shortage. Water harvesting and storage as well as water efficiency and water infrastructure are three key areas.

Water extraction and storage: seawater without that pinch of salt

Desalination and the use of the abundant saltwater in our oceans already play a crucial role in expanding drinking water supplies. In addition, further investments will be made in groundwater extraction as well as surface water storage to expand the supply of water.

Water efficiency: modern systems without leaks

It is essential to limit the waste of water. This can be achieved on the one hand through more efficient water use - for example in agriculture with modern irrigation systems - and on the other hand through more advanced monitoring and prevention of leaks in water pipes.

Water infrastructure: in the fight against water waste

Providing better water infrastructure is also a major area of focus in the coming years and decades to address water scarcity. All over the world, waterworks need to be built or modernized for improved treatment and the supply of drinking water. This also includes new water pipelines and wastewater treatment plants. Heavy investment in wastewater treatment can reduce water contamination and improve water quality.

Carefully selected

The global water market is already worth around $600 billion a year, with the potential to grow even further. In addition, various trends suggest that significant return opportunities may exist in the water investment sector. 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.

However, it is not easy for individual retail investors to keep track of the entire market and select the most promising investments. By investing in companies that offer innovative and marketable solutions to combat 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.

For this reason, Vontobel has launched the Aqua Index. This Index contains shares in companies that are active in the water sector and could benefit in a particular way from water-related trends. The aim of the strategy is to achieve long-term capital growth and positive environmental and social impacts. There is an index or management fee for managing the index. Investors bear the market risk of the stocks included in the index, as with a direct investment.

Many years of expertise in sustainable investment solutions

Vontobel is considered one of the pioneers in the field of ESG investments - as clients and investors have been able to benefit from sustainable investment solutions at Vontobel 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.

Our long-standing expertise in the field of sustainable investments is an essential part of 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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