How new innovations in technology could help prevent a global water crisis

On Monday 22^nd March, World Water Day will be celebrated as a way of raising awareness of the global water crisis. To mark this occasion, Amanda O’Toole, Portfolio Manager at AXA Investment Managers, delves into some of the main issues surrounding access to water, and provides her thoughts on how technology is creating genuine solutions that could play a part in preventing a worldwide water shortage.

What is the water scarcity challenge?

Water is fundamental to meeting life’s basic needs – from uses in homes to heating buildings, aiding in factory production processes and healthcare. But population growth – and particularly increasing urbanisation around the world – is outpacing water supply. Sadly, around 4bn people live without a reliable water supply during at least one month of the year.¹

The effects of climate change are real: weather patterns are drastically changing, leading to extreme weather events such as droughts, which, in turn, is exacerbating water scarcity and contaminating water supplies.

Further compounding these challenges is the widespread problem of water pollution: around 80% of the world’s wastewater is dumped² – largely untreated – back into the environment, polluting rivers, lakes and oceans, and creating potential health problems for around 1.8bn people whose situations force them to use such water.³

If nothing changes, this will undoubtedly put a huge strain on what is already a finite amount of natural resources – and the longer-term costs to society could be even more severe. By 2050, global demand for freshwater is expected to be one-third greater than it is today, emphasising the urgent action needed.⁴

Why could the water sector be an opportunity for investors?

In recognition of the need for action, The United Nations’ (UN) Sustainable Development Goal (SDG) 6 pledges to provide clean water and sanitation for all, although an estimated $114bn per year to 2030 is needed in order to achieve this goal.⁵ This will require support and funding from both governments and the private sector. This creates the opportunity for businesses in this field to make positive contributions through developing innovative solutions in an effort to reach these global targets.

So, how are companies providing innovation in the water sector?

According to the UN, only 0.25% of the planet’s water is usable.⁶ The rest is salt water, polluted or locked up in polar ice caps, glaciers and permafrost. Under current trends, demand for water for domestic, industrial and agricultural use is expected to exceed supply by 40% by 2030.⁷ This creates a whole value chain across water collection, desalination/purification, pumping, repairing and replacing ageing infrastructure, logistics and distribution, and even monitoring water usage for metering, billing and efficiency.

A diverse universe of companies operating across the entire water cycle are developing exciting technologies to address the water scarcity challenge, which we believe is creating compelling investment opportunities. Below are some examples of companies leading innovation in the water sector:

• Water and wastewater management

Xylem* manufactures and provides solutions for water and wastewater applications across the cycle from collection, distribution and use to the return of water to the environment. Its products include water and wastewater pumps, treatment and testing equipment, industrial pumps, valves, heat exchangers and dispensing equipment.

• Water treatment

Evoqua Water* provides customers with critical water needs for a variety of industries including energy generation, food & beverage safety and production, healthcare, and manufacturing. Its solutions include disinfection, filtration and high purity water systems.

Thermo Fisher* manufactures a range of water quality products including water purification systems, electrochemistry analysers (looking at pH and ion concentration), meters and accessories.   

Danaher* provides advanced purification technology to help analyse, treat and manage the world’s water from government and wastewater treatment facilities to lakes, streams and oceans.

• Monitoring water usage

Itron* is a technology and services company dedicated to the effective use of utility services. Its smart device and analytics solutions provide intelligence around areas such as water metering and use, water distribution and water leakages.

Are there other related areas supporting the water sector?

Alongside a growing population worldwide is increasing wealth, with many people indulging in more meat-intensive diets. Red meat like beef, for example, requires roughly 11 times more water to produce than pork or chicken.⁸ However, consumers who embrace vegan, vegetarian or ‘flexitarian’ diets –70% of the world’s population have reportedly reduced or cut out their meat intake⁹ – can help contribute to conserving water resources and limiting carbon footprint.

New technologies are providing solutions to address the need for more sustainable farming and food production, which could create further efficiencies around water preservation and use.

All stocks mentioned are for illustrative purposes only and should not be considered as advice or a recommendation for an investment strategy