Login to your account
Water scarcity is no longer a distant threat but a growing reality impacting billions. While only 3% of the Earth’s water is freshwater, and just 1% of that is accessible, this is more than enough meet global demand. However, the issue lies in insufficient investment in infrastructure and political will to distribute it effectively. At current levels, demand is fast outpacing supply, and the effects of climate change, urbanisation, and the demographic expansion of populations in regions prone to droughts exacerbates the crisis.
Access to clean water is one of the most pressing challenges of our time, and as water becomes an increasingly valuable resource, the infrastructure and technology supporting its treatment and distribution presents both significant challenges and a compelling investment opportunity.
The Global Water Crisis: A Tipping Point
According to the UN, nearly 40% of the world’s population experiences water scarcity, and is expected to rise as extreme weather patterns disrupt rainfall and freshwater sources. Major cities like Cape Town and São Paulo have already faced “Day Zero” scenarios where reservoirs nearly ran dry, while widespread droughts continue to threaten food security and social stability.
Today, the true value of water is still underappreciated in financial markets. Chronic underinvestment and lack of political initiative often hampered by corruption has led to outdated water extraction, treatment, and distribution infrastructure. Fortunately, innovation has not stood still, and continuous advancements in technologies offer an opportunity to avert crisis.
Desalination and Innovation: A Partial Solution
As ready access to natural freshwater sources becomes increasingly unreliable, desalination –the process of converting seawater into freshwater – has become a vital lifeline for arid countries such as Saudi Arabia and Israel, where 50% of the local populations rely on desalination for freshwater. It is estimated that more than 16,000 desalination plants currently account for the freshwater needs of over 300 million people globally.
However, desalination is not without issues. The process is very energy-intensive and generates large volumes of highly concentrated saline water (brine). Current technologies discharge brine at a rate of 1.5 to 2 times the amount of fresh water produced, and annual volumes could blanket Florida with a thirty-centimetre layer of residue.
To mitigate these issues, new innovations are emerging – cheaper and more efficient solar-powered desalination technologies are gaining traction, helping to reduce emissions, while processes such as Zero Liquid Discharge (ZLD) that aim to recover valuable minerals from brine are gaining increased traction in India, China, and the EU, from favourable regulatory pressures to reduce water waste.
Drip Irrigation: Efficiency in a Thirsty World
Drip Irrigation is a method of watering crops that delivers water directly to the root zone of plants at a slow, controlled pace. It has been shown to consume 60% less water and increase crop yields by between 30%-50% than surface irrigation and is highly effective in hilly, dry, and uneven terrains due to the decrease in water run-off.
Despite these advantages, uptake bottlenecks remain in developing nations due to the relatively expensive setup costs (ranging from $500 to $1,200 per hectare). However, successful subsidy programmes such as PMKSY in India and continued regulatory tailwinds in wealthy nations such as the US, China, and Australia are expected to deliver significant economies of scale to lower costs. This is estimated to deliver global market growth of 10% annually to a size of $12-$15 billion by 2030.
Water as an Investment Opportunity
With water security now being a pressing concern, financial markets are taking notice and a growing number of funds and asset managers are integrating water infrastructure, treatment, and conservation technologies into their portfolios.
Key investment themes include:
- Smart water management – Companies developing leak detection, digital metering, and AI-driven water efficiency solutions are seeing increased investor interest. These technologies help optimise water use, particularly in urban environments where aging infrastructure leads to excessive waste.
- Wastewater recycling – Treatment and reuse of wastewater are becoming a key focus for investors, particularly in industrial settings where there is room for water-intensive processes to be reengineered to minimise consumption.
- Public-private partnerships – Governments and financial institutions are increasingly collaborating to fund large-scale water projects, recognising that securing long-term water supply is both a public benefit and a strategic necessity.
According to estimates from the UN Sustainable Development Solutions Network, $735 billion in investment will be required by 2030 to meet global water and sanitation goals. The private sector will play a crucial role in closing this gap, particularly as institutional investors, sovereign wealth funds, and green bond issuers increasingly direct capital toward sustainable water infrastructure.
Looking Ahead: Balancing Crisis with Opportunity
Water security has become an economic and geopolitical challenge that will shape markets and societies in the decades to come. While the crisis is intensifying, so too is the opportunity to finance sustainable solutions that ensure equitable access to clean water.
For investors, this presents a unique intersection of financial returns and impact-driven investing. As regulatory frameworks evolve and demand for sustainable water solutions grows, the asset class is set to become a core component in future portfolios.
This article first appeared on ESG Investor
Share
