Water Scarcity Creating Investment Opportunities

Rising population, expanding cities and higher consumption are increasing demand for our limited supply of freshwater. There is an increasing awareness of the investment opportunities surrounding the issue of water, and “Water as Seen by an Economist”, an essay by Citibank economist Willem Buiter argues that water will become the “single most important physical commodity asset class”.

Although over 70% of the earth’s surface is water, less than 1% of this is drinkable freshwater, and we are using this up faster than it is naturally replaced. World population is growing at around 75 million people per year, putting more and more pressure on earth’s resources. In the developing world, which is booming in population, living standards are improving, together with increasing consumption of meat, this is leading to a much higher usage of water per person. As this continues, the UN estimates almost half the population will experience water stress by 2030, and McKinsey predicts demand will outstrip supply by 40% within 20 years.

Global water scarcity is becoming more of an issue, with predictions that Yemen will be the first nation to completely deplete their supplies. With increasing climate uncertainty, rainfall and flood patterns are likely to change, putting further pressure on current methods of water supply. Countries are already exhausting their groundwater supplies, lowering their water tables and diverting their rivers so some no longer reach the sea. These are not sustainable methods of water management, and there will need to be another system in the future, possibly including water recycling and desalination together with increased water efficiency.

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