Water ETFs to Play a Dwindling Natural Resource | ETF Trends

The basic building block of life is under duress. Sources for fresh, clean water are coming up short, and global warming is only expected to exacerbate the shortages. Investors may gain exposure to the dwindling water supply through four water-related exchange traded funds (ETFs).

This isn’t just a developing-country problem, either.

The Natural Resources Defense Council (NRDC) projects that there will be risk of water shortages in one-third of U.S. counties by 2050, writes Erik Stokstad for Science Insider. For 14 states, most severely in the Great Plains and southwest, 400 counties will experience “extremely high risk” of water shortages by mid-century, with a total of 1100 counties facing the risk. [Water ETFs: The New Gold, Blue Gold.]

In Australia, water scavengers are looking to the sea as five of the continent’s largest cities invest $13.2 billion on desalination plants, reports Norimitsu Onishi for The New York Times. Other countries, including the United States and China, are also looking into desalination as a viable solution to water shortages. [Your Guide to Green ETFs.]

However, desalination projects are drawing criticism from angry homeowners who are paying for higher water bills and environmentalists who say the projects consume too much energy and further contribute to global warming. Critics also point to cheaper alternatives such as conversation measures and recycling wastewater.

Population growth is also pressuring water shortages. In India, where urbanization has almost doubled water consumption in over five years, a severe water crisis is expected by 202, according to Rediff. The World Bank projects that most Indian cities will run dry by 2020 as major groundwater supplies are being extracted by an alarmingly increasing rate.

For more information on water, visit our water category. Our ETF Analyzer reveals four water ETFs trading now. All are currently below their 200-day moving average, but if you sign up for alerts, we’ll send you an email letting you know when they cross over:

  • PowerShares Water Resources (NYSEArca: PHO): The largest water ETF, with $1.04 billion in assets; 84.8% industrials; 12.3% utilities
  • PowerShares Global Water (NYSEArca: PIO): Has a 50.5% weighting in industrials; 32.7% weighting in utilities
  • Claymore S&P Global Water (NYSEArca: CGW): Has a 43.9% weighting in industrials; 32.5% in utilities; while all the ETFs are down in the last three months, CGW is down the least at -7.3%
  • First Trust ISE Water Index Fund (NYSEArca: FIW): Has a 61.9% weighting in industrials, 22.4% in utilities

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.