Investing in the future: Opportunities in new water technologies

Global warming and population growth are threatening the world’s freshwater supplies. Governments, organizations and businesses are trying to tackle water scarcity as part of the United Nations 2030 Agenda for Sustainable Development , but by 2030, billions of people will not have access to safe drinking water at home unless the rate of progress quadruples.

The rising demand for water efficiency and management solutions opens up an array of investment opportunities in new technologies, infrastructure and innovation. 

The world water crisis

Nearly three-quarters of the Earth is water, but just three percent of that is freshwater. Of that three, only one percent is accessible to nearly seven billion people.

Once we consider the effects of pollution, how much water is wasted and how much is used for food supply, we can easily see that the demand for freshwater outweighs the supply. Data from the World Resources Institute  estimates that an additional one billion people are expected to live with extremely high water stress by 2050.

Kent McClanahan, head of Responsible Investing at RBC Wealth Management, notes population growth and urbanization are two main factors behind the increasing demand for water.

According to data from the United Nations  , 55 percent of the world’s population was living in urban areas in 2022, with the figure expected to rise to 70 percent by 2050.

This will increase demand on both aging infrastructure and food production—two things that use considerable amounts of water. Old infrastructure contributes to water loss through leaky pipes and inefficiencies in the water supply chain. Agriculture is also responsible for using 70 percent of the global freshwater supply with livestock being the most water-demanding.

Investing in more than new technology

There’s more to investing in water solutions than being an early investor in the latest tech device that can pinpoint leaks in old water pipes or a plant that attempts to make ocean water fit for human consumption.

McClanahan says there are four main areas of focus when it comes to investing in water management:

• chemicals and equipment
• construction and materials
• utilities
• analytics

McClanahan notes that investing in a broader water theme through companies with different investment characteristics adds diversification to a portfolio.

The future of water investing

Investment strategies that employ environmental, social and governance (ESG) factors is on the rise. “The use of ESG data is becoming very prominent in around the globe,” McClanahan says. He says an increasing number of investors are more aware of their investments and are quick to react.

McClanahan notes that some who are in close proximity to areas or individuals experiencing the negative effects of the freshwater shortage may already be looking to invest in a water portfolio. He points out, “This is a megatrend that is here to stay for good.”

“Everything is interlinked,” he continues.” Climate change affects weather patterns, which in turn affects water. It’s a continuous cycle that the world has to tackle.”

Today, there is more potential for technology to solve these issues rather than create them. “SusTech” is a term that integrates sustainability and technology, bringing both worlds together to create value for companies, customers and society.

McClanahan points out that water has a significant role within SusTech as it relates to how water is consumed and managed.

He says there’s no shortage of companies that are working to find solutions—whether it be better water filtration systems, engineering water-efficient buildings or searching for a more energy-efficient way to desalinate ocean water.