The Socially Inspired Investor ESG in Focus

Investing in Water for a Sustainable Future

Tianyin Cheng, Claire Yi
S&P Global

Originally published 10.8.20

SUMMARY

  • The world is facing critical water shortages, and companies that focus on addressing the growing water crisis could represent key long-term growth opportunities.
  • Listed companies involved in water-related business activities, as represented by the S&P Global Water Index, have historically exhibited higher risk-adjusted returns than the broad global equity market.
  • Allocation to water can be systematically captured by rules-based, transparent index construction. Market participants could utilize index-linked water strategies to gain exposure to water, manage water risk, express their sustainability views, or allocate as part of a broader natural resource theme.

THE CASE FOR INVESTING IN WATER

Water is essential to the production and delivery of nearly all goods and services.  Many businesses are reliant on a sufficient flow of clean water to operate and realize their growth ambitions.  Overconsumption of water, water pollution, environmental degradation, and changing climatic conditions are making clean water an increasingly scarce resource. As the world population grows and competition for water resources between industry sectors intensifies, nations are set to experience a 40% shortfall in water by 2030.

https://www.spglobal.com/spdji/en/documents/education/education-investing-in-water-for-a-sustainable-future.pdf


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