Three Reasons I’m Bullish on Water, and You Should Be, Too

Water ripples in the sunlight. — (Image credit: Getty Images)

Today is World Water Day, and I’d argue that there’s no more critical time for individuals to consider investing in this natural resource.

As many across the country continue to bear the effects of climate change by way of increasingly tempestuous seasons, impact investing is top of mind as it gets closer to home.

According to a report by the 2030 Water Resources Group (a public, private, civil society multidonor trust fund hosted by the World Bank Group), “By the year 2030, global freshwater demand is expected to outstrip supply by 40%, and an estimated 1.6 billion people will lack safely managed drinking water.”

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I’ve previously written about the myriad ways to invest in water, including water-related funds directly, utilities, water testing and metering, desalination and infrastructure.

Here’s why I’m still bullish on the commodity.

1. There’s inelastic demand.

The world needs water, but there is only a finite supply of the resource. Indeed, according to the Intergovernmental Panel on Climate Change, “Roughly half of the world’s population is experiencing severe water scarcity for at least part of the year.” Therefore, it becomes incumbent on governments, humanitarian organizations and impact investors to find sustainable solutions to maximize the supply our planet has.

Although we know how critical water is for human consumption, we often forget how necessary it is for crops like beef, chicken, corn, potatoes or cotton that propel necessary industries like agriculture and textile production.

In our tech-forward world, we forget the cyclical nature of energy — that water use requires energy, and energy production needs water. Perhaps we’re producing less paper, but what’s the bandwidth looking like on our Wi-Fi networks? We must sense the invisible strain on this resource.

When basins and lakes are parched, we’re reminded that healthy rivers do more than promote summer recreation, they also support urban vitality.

When you pick up your next glass of H2O, recall its power in transforming the world around us.

2. It’s a hedge against poor health outcomes.

In February, NPR reported that the Environmental Protection Agency (EPA) recently moved to categorize nine new PFAS (per- and polyfluoroalkyl substances) — more commonly referred to as “forever chemicals” — under the Resource Conservation and Recovery Act. These substances are known to cause certain cancers, affect immune systems and negatively impact cholesterol levels, among other issues.

Modern medicine has made incredible advances in the past few years, and yet, too many (and increasingly younger) Americans are afflicted with hereditary diseases and those brought on by lifestyle choices and increasing amounts of stress.

As health challenges continue to ebb and flow through our personal lives, it’s a good reminder to find alignment in the missions of the companies you’re investing in.

3. The U.S. government continues to heavily invest in infrastructure.

Since the Biden administration’s Bipartisan Infrastructure Law was announced in 2021, it has sunk $400 billion into 40,000 projects across 4,500 communities in our country. Most recently, in September the initiative drew $180 million to launch a water recycling program.

Water shortage supplies are a serious matter, and the stunning images of Lake Mead over the past two years have been a solid frame of reference for the toll it has taken on our local economies and communities. Looking at investing opportunities for water management agencies is a smart place to start to find alignment with the Biden administration’s ambitious goals. Indeed, government investment in the water sector further strengthens the investment case.

When investment dollars go to work in the water sector, it improves access to clean water, revitalizes infrastructure and improves overall water conservation for future generations. That’s a long-term wealth building strategy that we all can get behind.

ALINE Wealth is a group of investment professionals registered with Hightower Securities, LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities, LLC; advisory services are offered through Hightower Advisors, LLC.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Peter J. Klein, CFA®, CAP®, CSRIC®, CRPS®, is the Chief Investment Officer and Founder of ALINE Wealth, a wealth management firm that specializes in providing clients with financial planning advice for every stage of their lives. Along with Peter’s deep financial wisdom, he adds considerable acumen in philanthropy, helping clients navigate family trusts, institutions, and nonprofits.