As the issue of water security continues to make headlines, many companies are working to address its related challenges, implementing systems designed to provide clean water to growing urban populations and maximize water use efficiency around the world. As a result, many investors are beginning to pay more attention to these companies.

What is Water Security?
The term water security refers to a given population’s ability to access sufficient quantities of quality water for sustaining well-being and development, including food production and sanitation. In places where clean water is abundant, its importance can be easy to take for granted. Nevertheless, water remains vital to political stability, public health, and the production of goods. In regions where water is scarce or contaminated, lifespans and livelihoods suffer as a direct consequence.

Jens Peers, Chief Investment Officer of Sustainable Equities and Fixed Income at Mirova, has spent countless hours analyzing sustainability issues worldwide and views water security as a critical concern. “Our water and food resources are two daily essentials for which you don’t really have an alternative. We need them to survive,” said Peers.

Water Crisis in Cape Town
Beginning in 2015, drought conditions threatened to make Cape Town, South Africa the world’s first major city to run out of water. To stave off disaster, the city enacted new limits on water use. By early 2018, regular rainfall returned, but the city’s water security remains in peril.

As the world’s urban populations continue to grow, providing reliable supplies of clean water to cities will remain paramount. Global science and technology companies like Danaher provide “water confidence” systems to cities to help ensure dependable water supplies for consumption and economic development. Danaher currently operates the Catskill-Delaware Water Treatment Facility, the largest ultraviolet water disinfection operation in the world. At full capacity, it will treat over 2 billion gallons of water daily for residents and businesses in New York City and its environs.

Not a Drop to Spare
In addition to questions of water treatment and supply, maintaining water security is also dependent upon efficient and environmentally responsible use of existing clean water supplies. To help ensure optimal water usage, system and service providers like Ecolab are working with commercial laundries, delivering filtration systems that decrease water usage and reduce energy consumption by lowering wash temperatures. The United Nations estimates that half the world’s population could begin to experience severe water stress by the year 2030. In response, Ecolab partnered with Nalco Water to open Water University in Naperville, Illinois in November 2017. The state-of-the-art facility will house 200 scientists who will focus solely on water security challenges.

The Future of Water Security
Peers points out that the importance of water security is not unique to a particular geographic region. “Clean water is an essential component of human and economic development,” he said, adding, “Businesses that are working to address water security challenges – including filtration and delivery systems – will play a key role in maintaining supplies of clean water to developed and developing economies in the years ahead.” Such companies, he believes, are likely to encounter new opportunities as cities in emerging economies in Asia and Africa seek to provide people and businesses with safe and dependable supplies of clean water.

In the developed world, the United States now faces the challenge of roughly 14% of all water flowing through pipes leaking out. “The quality of pipe systems is really bad. So, we believe, this presents an investment opportunity because there is a very strong need – and also because there is no alternative to resources like water,” said Peers.

Peers and his colleagues at Mirova are witnessing a growing awareness about sustainable water opportunities among investors, but portfolios remain underweight. “What I don’t understand is the little exposure people generally have in their portfolios to sustainable water investments. But because water is not really present in the major indices, investors generally don’t have much exposure to this area,” said Peers.

As Benjamin Franklin once wrote: “When the well’s dry, we know the worth of water.” This is a lesson that much of the world’s population will seek to avoid as they strive to meet water security challenges in the years ahead.

 


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