Questions around the opportunities regarding water investing are increasingly rising to the surface. Sailing within most currents is the idea of looking for businesses with products and solutions that tackle the underlying sustainability challenges represented in water access and supply.
These challenges abound. As the world warms, recent estimates from the United Nations (UN) suggest that for every centigrade of elevated temperature, the world sees a 20% decline in renewable water resourcing, impacting an additional 7% of the global population. A global problem requiring global solutions; a dream of secure global water access facilitated by pipe solutions and infrastructure.
Water concerns are growing in prominence and are not isolated. With climate change accelerating, recent estimates suggest half of the world’s population faces high water stress at least one month per year, with access to quality potable water resources becoming scarcer.
As part of the UN Sustainable Development Goals (SDGs), Goal 6, ensuring access to water and sanitation for all, sits alongside the broader developmental goals, including Goal 13 on climate action. Indeed, the interrelation of water and climate is seen in the increasing lack of predictability of water access, with droughts and floods gaining in prevalence. The lack of pipes, infrastructure, and resource is hampering the delivery of a product that is not only essential to health, but also plays a part in social outcomes. Lack of predictable access to water has societal and governmental ramifications, with restricted resourcing worsening poverty levels, food access, biodiversity and education accessibility.
From an investor perspective, while the 17 goals of the UN SDGs provide a fantastic blueprint for the problems that need solving in the world, not all those goals have corporate solutions. There is a split within the SDGs between those with corporate growth opportunities, and those that sit more broadly in the public sector to be tackled by governments, multi-laterals, and non-profit organisations.
Within our sustainable equity strategies, our portfolios look to identify companies providing solutions to sustainability challenges where the corporate sector plays a key role, and which have significant potential for long-term, structural growth. Goal 6 is these and there is a growing universe of investible companies focused on tackling water related challenges.
There is a growth opportunity for companies providing services to modernise water infrastructure, respond to emergency droughts and improve water conservation, as well as for equipment providers that help to increase the supply of drinking water through testing, filtration, and wastewater remediation. Given ageing infrastructure, a large amount of public funding is going towards tackling water scarcity, creating attractive long-term growth opportunities for companies with leading solutions.
Veralto is an example of a global company tackling water challenges, delivering the water pipe and the dream, across both developed and emerging markets. Newly spun out of parent business Danaher, Veralto came to the market in the second half of 2023, with a well-positioned water quality franchise to capture the long-term secular growth opportunities arising from the need for water security and supply. The company delivers precision instrumentation, advanced purification technology, a suite of operational products and solutions to serve the underserved need of water solutions, with the well regarded Hach brand ensuring safe water for a staggering 3.4 billion people every day.
Water and climate adaptation challenges don’t rely on operational resilience solutions alone. These problems are complex, and financial resilience considerations come into the equation too. Access to insurance protection and credit facilities has a role to play and speaks to the multi-dimensional, multi-stakeholder perspective that is critical in ensuring sustainable finance. The provision of insurance policies and financing across the capital structure in transition and infrastructure can be powerful tools in facilitating the repair and expansion of water infrastructure and improving water supply reliability.
Therefore, we are looking with fresh eyes at a growing challenge. New challenges require new ways of thinking and innovative responses from investors. As our planet faces unprecedented environmental and growing social challenges, water is emerging as a pressure issue. Investment opportunity exists in those businesses able to lean into delivering solutions to tackle both the access and delivery of water to our growing global population. Companies with these products look well positioned to sail into the future.
