Investing in Water May Be Appealing, but Fund Investors Have Few Compelling Choices

  • 23.10.2022
  • Morningstar

The case for investing in water is driven by the challenge of providing enough freshwater to meet growing demand against the backdrop of climate change. Global population growth along with improving living standards in developing countries are increasing demand for clean drinking water and for the use of water in agriculture and manufacturing.

Meeting growing demand requires a reliable and growing supply of freshwater. But much of the world’s existing water infrastructure is aging and in need of replacement or modernization. Looming above all is climate change, which poses a threat to freshwater supply. Extreme weather events are already affecting the reliable availability of water. And longer-term changes in temperature and precipitation patterns will lead to reduced amounts of freshwater in many parts of the world.

From a thematic investment perspective, the supply/demand dynamics of water create opportunities for investments in utilities, infrastructure, and technology that increase the supply of safe freshwater and the reliability of that supply.

From a sustainability perspective, investments in water contribute to resource security and basic needs, two key impact themes identified by Morningstar Sustainalytics. Similarly, investments in water contribute to several of the United Nations Sustainable Development Goals, including clean water and sanitation; sustainable cities and communities; and responsible consumption and production.