Investing in Water - It's Not Just for Drinking

You turn on the faucet, and-voila-you have a drink of water! Those of us who come from western nations tend to take water for granted. However, after a few years in Israel, we appreciate the fact that whatever water we receive is a gift. The media is filled with reports about how the world is running low on crude oil, but not too much attention is paid to the growing water crisis.

Water as an Investment

As abundant as it appears to be, only about 20% of the global population has access to running water.  Additionally, only one-third of the world’s population has access to clean water. In fact, many estimate that in 40 years, more than four billion people, half the world’s population, will be living in areas that are chronically short of water. Moreover, economic development has placed greater pressure than ever on the supply of fresh water. In 1900, the global annual water use per capita was 350 cubic meters. In 2000, that number had grown to 642 cubic meters. In the United States alone, the demand for water has tripled in the past 30 years, while the population has grown by just 50%.

China, Africa and the United States

The need to increase access to clean water around the world has led some to call water the “oil” of this century. As the world becomes more and more developed, wealthy countries will not only be able to afford, but will also have a moral obligation to provide this basic necessity to their citizens. China and India, which are experiencing economic booms right now, are therefore investing hundreds of billions of dollars in improvements to their water infrastructure, while many sub-Saharan African countries that are beginning to show signs of economic growth will soon need to begin to provide basic resources to their population. All three of these examples, are huge populations that are in their infancy when it comes to the basic needs of their citizens. They have been steeped in poverty for decades, and they are emerging only now. As such, they need to start from scratch, which means access to water and building roads.

In terms of the United States, the Environmental Protection Agency estimates that up to $1 trillion will have to be spent on upgrading U.S. water infrastructure over the next few years. Much of the country’s aging infrastructure is more than 100 years old and is in a state of utter disrepair. In the United States alone, the network of drinking water pipes extends more than 700,000 miles - more than four times the length of the National Highway System. This all adds up to the need for new reservoirs, better water canals and more efficient irrigation systems. Israel happens to be a global leader in the innovative technology needed for making such repairs.

Get Advice

While many experts believe that there will never be substitutes for water, I tend to take a much more optimistic view of things. All kinds of technologies are being created to tackle the issue before it turns into a crisis. If we were to fast-forward 50 years, I am sure that we would be shocked at the technological advances made. Investors should speak with their financial advisers to see what options are available to invest in the water industry.

Disclosure: None

 

Comments

[keithfeather:]

Dirty water + energy = clean water. We have plenty of dirty water.

2008 Aug 28 08:21 AM

[mrboogers:]

Ummm...., you do realize you didn't actually say anything, right?

2008 Aug 28 08:23 AM

[Road Runner:]

Your article is more of an introduction to an interesting article than an article itself. There little in your article that an investor can use. I agree that water is a critical issue, and maybe a great investment opurtunity.

2008 Aug 28 10:08 AM

[surfgrrl:]

Aaron, it would be great for you to do some in-depth research here on investment opportunities in the companies involved in water . I hope you will include HOO (European company) in the list, they have some involvement in China, and several other nations -

2008 Aug 28 11:23 AM

[Chemist29:]

water is not the oil of the next century. there is a lot of water around. And as keithfeather mentioned, just takes some energy to fix it. Same can't be said about oil, although as an investment opportunity, its interesting

2008 Aug 28 02:40 PM

[longtermstocks:]

We understand water is needed, but why should we invest in it? What stocks do you recommend?

2008 Aug 29 10:04 AM

[granger:]

DHR

2008 Aug 30 06:49 PM

[Khaleel:]

The 'Water' value chain is highly fragmented from Pipe manufacturers, Filteration experts, Valve and Metering companies, Utilities, Turnkey operators, Chemicals and Infrastructure and Distribution.

I have spent a lot of time understanding the players but if one needs quick access to the 'Water Space' my suggestion is to look at ETF's such as PHO, PIO and CGW.

It is also very important to get the 'Sub Sector' right when investing in water so subscibe to a newsletter like 'WIN' to keep updated on trends in the industry and where they are flowing (No Pun Intended)

2008 Sep 01 06:53 AM

[stockhunter101:]

Looking for water ideas? I was too...but this introduction didn't help much at all. Here's a much better one that actually goes over a couple well-known and a few lesser-known water investment ideas:

seekingalpha.com/artic...

2008 Sep 07 12:03 AM

[David Zetland:]

This "piece" (certainly not a whole) doesn't say anything, and it misses a major point -- water management is far less efficient than oil management (and yes, I'd even say that Saudi or VZ management is relatively better off. Because there is so much potential for improvement via improved institutions, investment in water is tricky (regulatory risk). Read my blog (aguanomics.com/) for more depth on water and economics.

2008 Sep 07 04:08 PM