As energy production puts a strain on water resources in the coming decades, usable water will become an increasingly limited commodity. Investors can capitalize on the global thirst for water with exchange traded funds that focus on conservation and purifying potable water.
“There is an increasing potential for serious conflict between power generation, other water users and environmental considerations,” according to the UN World Water Development Report, Bloomberg reports.
The UN calculates that about 90% of power generation is categorized as “water-intensive.” Water-related needs for energy production tripling since 1995. Specifically, shale gas and oil production “pose significant risks” to water resources.
“As long as you’re producing thermal power, you require water,” N.K. Ranganath, managing director of the India business of Grundfos AS, said in the article. “There’s no technology that replaces water in thermal power.”
As water demand rises, over 40% of the global population is expected to live in areas of “severe water stress” by 2050.
Meanwhile, in the U.S., “water scarcity threatens to constrain burgeoning domestic oil and gas production from shale formations,” according to the IEA.
Investors interested in gaining exposure to the growing water industrial and utilities sectors have a couple of domestic and global ETF options.
For exaple, the First Trust ISE Water ETF (NYSEArca: FIW) and PowerShares Water Resources Portfolio (NYSEArca: PHO) both track U.S. copmanies that derive their revenue from products that conserve and purify water. Over the past year, FIW has gained 18.8% while PHO is up 14.7%.
Additionally, the Guggenheim S&P Global Water Fund (NYSEArca: CGW) and PowerShares Global Water Portfolio (NYSEArca: PIO) both track companies that are associated with global water utilities, infrastructure, equipment, instruments and materials. CGW has 38.4% in the U.S. 16.9% in the U.K. and 8.2% in Switzerland. PIO’s top country weights include U.S. 46.9%, France 13.2% and U.K. 12.5%. CGW is up 21.0% over the past year while PIO has gained 26.7%.
For more information on the water industry, visit our water category.
Max Chen contributed to this article.