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The Water Crisis Is Your Investment Opportunity

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Diverse sectors and subsectors give you many chances to profit.

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Editor's Note: Minyanville is excited to introduce Gerry Sweeney as the newest contributor to our community. Gerry has been involved in the water space for nearly ten years. Currently, he's the Portfolio Manager for Aqua Terra Asset Management LLC.

Water has been an investment theme for many years. But in recent years, it's started to move from the periphery to the mainstream. Many of the factors which are driving the idea of sustainability in terms of energy, agriculture, and other commodities are at the heart of water issues.

Without question, water will be a powerful long-dated investment theme for the next several decades. However, it's a complicated theme being influenced by many stakeholders -- from the community level to national policy.

But there will be no single silver bullet to solve the crisis. I believe, instead, that a portfolio approach will be required. Multiple technologies and techniques across various industries and at various levels of government will be essential to manage the situation. Each region and populace will have different thoughts and different methods to overcome their specific issue. While a unified set of methods would be ideal, it would appear highly unlikely that a set could be developed and maintained. This patchwork will create investment opportunities in many different industries on a global basis.

The purpose of this "primer" is to give a very high level review of global water scarcity and the investment opportunities surrounding the issue. In the coming weeks, I'll explore more in-depth issues, as well as comment on any pertinent news which may be of investment importance.

Supply


At the heart of the water crisis is supply and demand. While water is abundant, potable or clean water is extremely scarce. Studies suggest that approximately 0.3% of all water on the planet is available for consumption. The majority of potable water is locked in polar ice caps or snow cover and in inaccessible underground aquifers. The finite amount of water needs to be used for human consumption and living standards, environmental stabilization, agriculture, energy production, and hydrocarbon mining, and most industrial and manufacturing processes.



Adding to the supply concerns are increasing levels of pollution and limited or aging infrastructure for municipal treatment. Industrial and agricultural run-off -- while recognized as a serious issue -- still causes considerable damage, and historical transgressions from these areas still mar the water landscape.

To further complicate issues, new pollutants are entering watersheds. In recent years, there have been studies showing trace amounts of pharmaceuticals in drinking water, including drugs for mental illness, cholesterol, anti-anxiety, and sex hormones ("the bro" an investment opportunity for water!) to name a few. While pharmaceuticals are recorded in trace amounts, questions arise as to the long-term effects based on daily consumption.

Adding to water stress is the unequal allocation of the resource. Water -- just as any other commodity -- is allocated unequally on a geographic basis. One of the most "water rich" countries includes Canada, which has a much smaller population and degree of global GDP.

Meanwhile, countries such as China, face constant supply constraints. Further, while China does have access to water, it's geographically disparate in the country. The coastal areas of China represent the manufacturing centers and dense populations. However, much of China's water is located in land from these areas, leading to overuse and over-pumping of natural aquifers in the coastal regions.

Finally, Climate change will be a major factor affecting supply. Generally speaking, climate change has, and will continue to alter the Hydrological cycle, leading to increasingly dry periods in arid portions of the world and increasingly wet periods in other regions.
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No positions in stocks mentioned.
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