There’s a water problem. Not just in the United States, but all over the world. As we hunt for a solution to the crisis, water exchange traded funds (ETFs) are an opportunity to play it.
The water crisis affects all of us, and it impacts all industries. Case in point:
- Jim Jubak for MSN Money reports that the North China Plain is responsible for 67% of the country’s wheat crop. In the 2010 harvest, China’s wheat production fell and this year’s harvest could be even worse – all because of a lack of water. The water shortage does not just equal less potable water for citizens, it is a trickle affect into many other markets.
- Another region of the globe where water is invaluable is Australia, who has just experienced intense floods and drought, and has lost their wheat output.
- Much of the world has enough water, but the problem is that the supply locations, populations, pollution controls, incomes and the fact that water isn’t easily transported makes it difficult to get it to where the need is greatest.
- According to the U.N. Food and Agricultural Organization, by 2025, 1.8 billion people will live in countries or regions with absolute water scarcity, while two-thirds of the global population will be under what the agency calls water-stress conditions.
The water ETFs track a basket of companies involved in finding solutions to the water problem. PowerShares Water Resources Portfolio ETF (NYSEArca: PHO) is 100% allocated to U.S. corporations, making this a purely domestic play. If you want a more global approach, PowerShares Global Water Portfolio ETF (NYSEArca: PIO) gives nearly 30% to the United States, but the rest goes to Japan, Canada and developed Europe. The United States is nearly 40% of Guggenheim S&P Global Water Index (NYSEArca: CGW), and you can also find Europe, Hong Kong and Brazil in here.
Tisha Guerrero contributed to this article.