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Investing in water

Please be reminded that this article serves to illustrate how it is possible to invest in line with this theme. In using the funds and companies as examples, this does not constitute a recommendation to invest in these, or any other investment. Barclays has not undertaken a review of these funds, nor are they part of a Barclays Select list. If you’re not sure where to invest, you may want to seek independent advice.

Investments may fall as well as rise in value; and you could get back less than you put in.

Global water supplies are under pressure, but there are innovative companies aimed at helping to efficiently preserve, treat, and recycle water. Here, we examine how you can invest.

Click to toggle accordion What you’ll learn:

Why pressure on our water reserves is increasing.

How companies are developing solutions.

How investors can gain exposure to companies focused on solutions.

Water is one of our most precious resources, but supplies are under pressure. Clean, accessible water for all may seem a basic right, but due to a variety of reasons millions of people across the world still become ill or die every year from diseases associated with water and sanitation.

Pressure on water supplies is increasing, and poor access to this resource and sanitation are a result of many factors – a growing population, bad economics, poor infrastructure, and conflict and war to name a few.

Water scarcity affects food security, livelihood choices, and the educational opportunities of the poorest citizens of the world. The United Nations states that water scarcity affects more than 40% of the global population and is projected to rise, with more than two billion people at risk of reduced access to water by 2050.1

Climate change will intensify the risks associated with water availability and quality. Moreover, the transport, treatment and use of both clean and waste-water are significant sources of greenhouse gas emissions.

How investors can help tap into water opportunities

Water scarcity can seem like a distant issue when for many of us it is immediately available at the end of a tap. With the increasing frequency of droughts, as we have seen in Australia, California, and South Africa, amongst many places, the risks are growing.

The pressure on global water supplies has encouraged governments and companies to find ways to save or manage water more efficiently. Some companies are developing solutions to reduce water usage, and to effectively treat waste water.

These innovations range from converting seawater into freshwater, to the introduction of smart meters and smart devices to reduce usage in the first place. In all cases, companies have recognised that finding solutions to our water challenges is an area that has potential for growth.

As investors, our money provides the capital that finances these companies. With impact investing, you can choose to invest in funds and companies that are minimising their negative contribution to our water challenges and/or actively addressing them.

Choosing for water

If you want to invest to make a positive contribution to water and sanitation, you have options both in the types of funds available, and their investment strategies.

Some funds, for example, invest across all industries and look for companies that minimise their use of water or risk of exposure to water scarcity. Others are more proactive about investing in companies where the business delivers products and services that provide solutions to water challenges.

One way to gain exposure to this theme is through an exchange traded fund (ETF), such as the iShares Global Water ETF. The fund seeks to track the performance of an index composed of 50 of the largest global companies engaged in water related businesses. Another is the Lyxor World Water ETF, which aims to track the performance of the 20 largest companies operating in the fields of water utilities, water infrastructure and water treatment.

One company in both ETFs is Pentair, which delivers a comprehensive range of smart, sustainable water solutions to homes, business and industry around the world. Its portfolio of solutions enables access to clean, safe water; reduced water consumption; and recovery and reuse of it. Pentair works to ensure water is clean when returned to the environment, helping to address the challenges relating to access to clean water.

Another option is to choose a fund where the manager actively picks companies that address these water challenges.

As an example, the Pictet Water Fund invests in companies all over the world, providing water supply or processing services, water technology, or environmental services. One such company is Xylem, a designer, manufacturer, and service provider for water and waste-water applications addressing the full-cycle of water from collection, distribution and use, to the return of water to the environment.

Xylem helps mitigate the effects of climate change by providing products that aid customers in reducing their own environmental footprint by reducing their energy and other resource consumption needs.  It also helps customers to adapt to the effects of climate change, strengthening their communities’ resilience, particularly with regard to the increasing number of extreme weather events, such as flooding and droughts.

Investments may fall as well as rise in value; and you could get back less than you put in. It’s also important to remember that, ideally, you should avoid relying on the fortunes of just one sector, and create a diversified investment portfolio with a wide range of assets, to include other sectors.

Please be reminded that this article serves to illustrate how it is possible to invest in line with this theme. In using the funds and companies as examples, this does not constitute a recommendation to invest in these, or any other investment. Barclays has not undertaken a review of these funds, nor are they part of a Barclays Select list.

Smart Investor does not offer personal financial advice. If you’re not sure where to invest, you may want to seek independent advice.

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