From scarcity to strategy: water as an investment opportunity

In many industries, water is essential in cooling, cleaning, dilution and chemical reactions. Companies’ supply chains account for around two thirds of global water consumption. A mere seven sectors account for 70% of freshwater consumption and pollution.

The focus is often on water quantity but water quality is just as crucial. Poor water quality can damage equipment, reduce efficiency and compromise product standards. A Barclays report estimates that water scarcity may cost companies in the consumer discretionary sector up to $200 billion. A CDP study warned of potential annual losses of more than $300 billion if water risks are not managed.

Some industries are faced with even greater demand for water. The semiconductor sector, for instance, is the largest consumer of ultra-pure water (UPW) – a highly refined form of water that is used for cleaning microchips during production. As chips become smaller and more complex, demand for even cleaner water grows as well. UPW is also essential in generating energy, especially in thermal and nuclear power plants, which are affected by corrosion and scale in turbines and boilers. The chemical and pharmaceutical industries likewise rely on UPW to guarantee product purity and reduce environmental impact.

There is clearly a growing need for investments in water but traditional water companies often struggle to generate strong returns. It is best for investors to view the water sector from a different perspective. Four areas in water technology may play a key part in tackling industrial and wider economic water challenges:
 

• Digital water solutions: sensors, AI and satellite data make it possible to monitor water consumption, detect leaks and improve efficiency. Smart meters give both utilities and consumers real-time insight into consumption and losses, thereby facilitating better water management and maintenance planning. These technologies tie in seamlessly with wider industrial digitalisation trends such as Industry 4.0.
• Advanced water treatment and recycling: new technologies including nanofiltration, membrane technology and biological purification help industries to treat and reuse waste water, reducing both demand and pollution. In Indonesia, a nanofiltration upgrade led to an 85% reduction in the use of chemicals and lower energy costs. Companies such as TSMC and Dow recycle large volumes of water to protect operations and reduce dependence on freshwater. These circular approaches are becoming essential, especially as water-related conflicts between companies and communities are on the rise.
• Desalination: removing salt and impurities from seawater is nothing new but it is becoming more efficient and more affordable. Advances in membrane technology may reduce the costs of seawater desalination from $0.50 to $0.30 per cubic metre. Where desalination is driven by renewable sources of energy, it offers a sustainable source of water for industries in water-stressed coastal areas. Lundin Mining, for example, uses desalinated water in its Chilean copper mine to safeguard production in a dry climate.
• Precision irrigation is a smart agricultural technology that utilises data and technology to deliver the right quantity of water to crops, at the right time and in the right place. Instead of evenly watering entire fields, it relies on tools such as soil moisture sensors, weather forecasts, satellite images and GPS to align irrigation with specific requirements of various zones within a field.

The water crisis is one of the greatest challenges of our time but equally an investment opportunity for those looking ahead. Innovation is key: smart solutions that combat wastage, tackle pollution and improve access. For investors seeking to make an impact, water technology is a domain that will continue to grow in importance in the years ahead.