“The water demand footprint for an individual reaches beyond just personal use,” Goff said. “Water is required to generate not only the crops we consume, but the crops we use as feedstock for the cattle we use for milk or food. Water is used heavily by utilities to generate the power we use, and is an input in many areas of our lives that we don’t associate with water usage.”
Moreover, Goff mentioned that we waste a lot of water globally as almost half of all water use globally is wasted or used inefficiently, which leaves room for innovation and improvement. One driver of returns in the water industry will include those that focus efficiency of water transportation and usage.
Consequently, investors who are interested in tapping into the water industry’s growth potential can take a look at water-related ETFs, like the relatively new Tortoise Water Fund (BATS: TBLU), which will try to reflect the Tortoise Water Index of water companies.
Matthew Weglarz, Director and Portfolio Manager at Tortoise Index Solutions, explained that the underlying Tortoise Water Index stands out from the competition due to its indexing methodology, which eschews traditional market cap-weighted themes. The TBLUE Index incorporates fundamental weighting to seek diversification, qualification as a registered investment company and higher orientation to water-related businesses.
The underlying index also implements a form of smart beta indexing strategy, specifically a revenue-weighting methodology, where revenues from all potential index companies are scanned annually from company 10-Ks or equivalents, and those with at least 50% of gross revenues from water related activities comprise the “direct water exposure” segment, which are then weighted to represent 70% of the total, and those with “indirect water exposure” will be weighted to represent 30% of the index.
Weglarz argued that TBLU may allow access to one of our most essential assets, provide fundamentally driven exposure to the water industry, incorporate all potential beneficiaries in the water value chain, give investors exposure to a rules-based index generation process and deliver liquid access to the water universe.
Financial advisors who are interested in learning more about the water industry can watch the webcast here on demand.