What a Second Trump Term Means for Investing in Water Safety

A drop of water suspended above ripples.

(Image credit: Getty Images)

As the world faces increasing water scarcity and challenges securing reliable water sources, there is a need for better investments in water infrastructure. According to the United Nations, 2 billion people worldwide cannot access safely managed drinking water services.

It’s clear that the growing demands placed on water resources are reaching new levels, fueled by the rise of AI and data centers, rapid population growth and the devastating impacts of climate change. While legislative action has begun remediation efforts to protect our water supply, providing a clear signal to investors that the water sector is an important area for future investments. However, there is significant concern about the possible future deregulation of water policies, including reduced protection of streams, wetlands, and pollution standards, which would move progress in water standards in the wrong direction.

What do water investors need to know about the sector’s long-term sustainability in the coming years?

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Rollbacks to clean water are a possibility

Helping to ensure the continued availability of clean water has always been a legislative priority, and progress has been made to shore up our country’s failing grades from the U.S. Environmental Protection Agency (EPA). One of the challenges the EPA faces is PFAS (per- and polyfluoroalkyl substances) and other contaminants in water supplies. In April of 2024, the Biden-Harris administration finalized the first national drinking water standard to limit harmful PFAS chemicals, known as "forever chemicals," protecting approximately 100 million people from associated health risks, including cancer and organ damage. This initiative includes $1 billion in funding through the Bipartisan Infrastructure Law to help communities — particularly disadvantaged ones — address PFAS contamination in public water systems and private wells.

This rule is a huge step forward in reducing water exposure to PFAS compounds, helping safeguard public health and advancing environmental justice.

If the new administration revokes environmental initiatives like this one, water supply challenges could worsen, placing even greater pressure on the need for comprehensive water management strategies.

The strategic importance of investing in water

Water demand is rising from all sectors: agricultural irrigation, industrial manufacturing and, increasingly, technology-driven industries, such as data centers. In addition, frequent droughts quickly affect the water supply and cause faster evaporation rates. Relying on traditional water sources will become more difficult as changes to supply and demand test the limitations of our current system.

According to the World Resources Institute, by 2040, 33 countries will face extremely high water stress, with regions such as the Middle East and North Africa experiencing the most significant shortages. Urgent action on proactive investments in the water sector may be required to help mitigate these challenges.

Investments in the water sector can help turn the tables. Water is an inelastic resource with no substitutes, and its strategic importance is growing, providing a critical avenue for investments for both long-term stability and short-term returns and an opportunity to support the most pressing socioeconomic matters of our lives.

Avoid greenwashing and become a global player

Investing in water is intrinsically aligned with environmental, social, and governance (ESG) principles. As the foundation of all life, water is one of the most sustainable investment strategies conceivable. The United Nations' 2030 Agenda for Sustainable Development outlined 17 Sustainable Development Goals (SDGs), and five of them are directly connected to water:

Clean water and sanitation
Ending poverty
Good health and well-being
Economic growth
Action to combat climate change

Investors can play a pivotal role in advancing global sustainability by focusing on infrastructure development, helping to ensure equitable access to clean water and promoting resource conservation. You can invest in specific companies by purchasing their company stock, but you can also get a mix of water investments by purchasing a water-focused exchange-traded fund (ETF). ETFs allow investors to have diversified exposure to water-related stocks without having to select individual companies. Many investors will choose more standard investing options like water stocks. With water stocks, investors can invest in individual companies supporting the sector, such as utilities and infrastructure-based companies. Private equity options are also available for sophisticated and accredited investors with longer time horizons, lower liquidity needs and a higher risk tolerance.

Avoid greenwashing by closely reviewing the companies you are choosing to invest in to help ensure they have sustainable principles and long-term growth potential. Work closely with a financial adviser to carefully examine the fund’s sustainability goals, investment criteria, transparency in reporting and quantifiable metrics. All of these will help an investor determine whether a fund is transparent about its investment quality.

Investing in water-related infrastructure, technology and utilities is crucial for ensuring the future stability of our planet and its global citizens. The water demand is not going away, and neither are the impacts of climate change.

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.