Kristal Insights Mins Read
Your Next Investment Strategy Comes Straight Out Of Your Kitchen Tap!
With approximately 71% of the world’s population having access to an adequately managed water service, preventable deaths due to cholera, diarrhoea, polio, dysentery, and typhoid remain steadily on the rise. It is estimated that an investment of 1 trillion USD until 2035 is imperative for maintaining, improving or replacing the existing water structures in the United States alone.
Knowing that most countries will fall under the category of water stressed regions by 2025, investing in water is now not only a wealth generation strategy, but also a necessity that most investors must consider while weighing their options.
The Economic Ramifications of the Water Crisis
Like other goods such as oil and gold, water is an economic commodity, and its demand decreases and increases based on the incomes of individuals. With the water crisis, experts believe that the lack of clean drinking water will have strong ripple effects that extend into a multitude of industries.
Significant Impact on Energy Production
To begin with, energy production (nuclear, coal, and oil) relying heavily on clean water for a myriad of processes, such as transporting, cleaning, extracting or even cooling the product, this is an industry that will suffer a massive hit with the rise in the water crisis. Electric companies will see the largest impact of the water crises, as their electric utility plants require large volumes of water to cool down their generators.
Unfortunately, this is something that is already happening. According to the World Health Organisation, over 50% of the global utility and energy companies ended up experiencing massive losses in their business due to the impact of low water. Similarly, in 2016, due to the historically low levels of water in the Guri Dam, Venezuela had to significantly cut back its electric power generation.
Significant Impact on Agriculture
Undoubtedly, the water crises also has significant impacts on global agriculture and the subsequent availability of food. Take the California drought for example – the agriculture industry in the United States now suffers a yearly hit of 1.4 Billion USD due to the lack of usable water in the state. With agriculture being a prime source of economy for many developing nations, many countries throughout the world can suffer through significant economic ramifications, such as poverty and lack of food, because of this. This is particularly dangerous for countries that rely on irrigation to sustain their agricultural efforts, such as Africa.
Significant Impact on the Price of Potable Water
Finally, as is the case with any other economic commodity, as the demand for clean water rises (with its supply slowly dwindling), we are likely to see high price tags placed on water (even if its purity levels may be low). As water and food remain as one’s fundamental needs, the results of the continual use of substandard water due to affordability can lead to the spread of a range of water borne diseases. Considering that there are over 10-12 million causes of common water borne diseases (according to WHO), the results of the same can even extend to preventable deaths and plagues.
What You Can Do to Better This Situation
As water is growing increasingly scarce, investors can hope to enjoy long term growth by investing in water. This helps you achieve two major things: the first is that you can diversify your portfolio and expect great returns, while the second is that the funds you invest can help large companies offer viable solutions to the water crisis.
There are many global companies that are doing their bit to combat the water crisis. We looked up some ETFs that one can consider investing in if they are looking to be a part of the clean water revolution:
Invesco Water Resources ETF (PHO)
As one of the largest water ETFs available, PHO’s net assets are worth 865 million USD. This ETF offers exposure to mid-cap and small-cap companies, with its top 10 holdings including names like Waters Corporation (WAT), Danaher Corp (DHR), and Roper Technologies (ROP). This U.S. based fund has a total of 37 holdings, and an expense ratio of 0.68%. Finally, it is important to note that PHO tracks funds that fall under the NASDAQ OMX US Water Index.
Invesco S&P Global Water ETF (CGW)
CGW offers exposure to small cap, mid cap, and large companies, and chooses its companies based on which ones stand to gain the most from an increase in the demand for water (this includes delivery infrastructure, and water quality, both). 47% of its holdings are based in the U.S., while the rest are scattered all over the globe, giving investors access to a broad range of companies. CGW tracks funds that fall under the S&P Global Water Index, and some of its top holdings include American Water Works (AWK), Danaher Corp (DHR), and Xylem (XYM). It has net assets worth 600 million USD.
Invesco Global Water ETF (PIO)
PIO’s net assets are worth 183 million USD, and it tracks funds that fall under the NASDAQ OMX Global Water Index. Unlike the previous ETFs, PIO places its focus on global companies that aim to create products that enable water purification and conversation. Some of its top holdings include, Danaher Corporation (DHR), Pentair PLC (PNR), and Ecolab Inc (ECL).
First Trust Water ETF (FIW)
FIW tracks funds that fall under the ISE Clean Edge Water Index, with a focus on large and mid cap companies that mainly generate their revenue through wastewater management and potable water solutions. Some of its top holdings include Tetra Tech Inc, Danaher Corp, and Ecolab Inc, amongst many others.
So… Where Does This Leave Us?
With the water crisis being an imminent threat, investing in water makes sense not only from the perspective of conserving the resource, but also from the knowledge that a scarce commodity is more likely to help you grow your wealth faster than one that is not as scarce. Water offers the opportunity to diversify your portfolio too, making this a great option for investors who are prioritising the same.
If you, too, are looking to invest in new-age resources like water, you may find viable strategies on our portal. Or, you can drop in a line to firstname.lastname@example.org for more information!
The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.
This blog article has not been reviewed by the MAS. It is prepared solely for information purposes and does not constitute an offer or solicitation for the purchase or sale of units in the funds. This does not constitute any form of investment advice and Kristal Advisors (SG) Pte Ltd does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Kristal Advisors (SG) Pte Ltd.
Other stories you might like
5 Mins Read
5 Mins Read