Water is a very important part of our lives, and an industry focused on providing usable water to meet everyday needs is growing. With greater attention on improving aging infrastructure, investors may also consider a water-related exchange traded fund to capitalize on the potential build out ahead.
On the recent webcast, Dive into the Water ETF Space, Jeremy Goff, Director at Tortoise, argued that there are six core investment themes that can drive returns in the water industry.
First off, Tortoise expects supply and demand imbalances, largely in the form of supply shortages, to rise globally. The investment requirement in infrastructure and the shift of that investment source from public to private are also two factors that could support further growth.
Technology improvements can help make water use and distribution more efficient, along with improving how we treat water. Water prices have also been increasing at a faster pace than oil prices since the 1980s, with a steadier path and with much less volatility. Lastly, the regulatory and political climate are favorable for both infrastructure and technology improvements.
“Water is a critical, essential asset to a growing population,” Goff said. “We believe the need for investment in water infrastructure is clear. Water infrastructure providers and related service providers should be positively impacted by such investment.”
Water, like other commodities, is a finite resource, with less than 1% of all water on earth able to be consumed by humans. Consequently, Goff argued that the water value chain is very infrastructure intensive as we divert potable water to consumers, and thus, very expensive. For instance, according to the American Water Works Association, at least $1 trillion is required to restore existing water systems and build new infrastructure over the next 25 years.
“With existing U.S. water infrastructure crumbling due to inadequate investment and other areas of the U.S. lacking essential infrastructure, sizable investment is expected to ensure safe and reliable water supply,” Goff said.
Along with personal water usage, water is mainly used in other global industries. Specifically, agriculture makes up a hefty 70% of global water demand while industry usage makes up 19%.