By John Drachman
All day I’ve faced the barren waste.
Without the taste of water… cool, water…
Bob Nolan’s 1936 hit “Cool Water” tells the story of a parched cowpoke singing as he struggles to find water among the desert’s mirages.
Fast forward to 2021: Populations are struggling to escape desertification and other climate change impacts as they migrate to where life is cooler and wetter. The thirst for the earth’s limited water supply grows stronger by the day. Nothing can live without it. Water is at the center of our life cycle: what we drink today, the dinosaurs drank yesterday.
“The global water supply is finite and there is no new water,” says Janet Glazer, portfolio manager of the FidelityWater Sustainability Fund (FLOWX). While the water may not be new, it requires treatment to remove harmful contaminants. Accordingly, fund managers like Ms. Glazer are recognizing ways for investors to participate in the growing value of earth’s most precious commodity: its water supply and the technologies that keep it clean and flowing.
Ms. Glazer herself favors companies that combat water shortages through “new treatment technologies, smart water networks, desalination systems, non-revenue water products, metering solutions, outsourcing systems, and testing equipment.” She likes Evoqua’s (AQUA) technology for its capabilities in removing noxious “forever chemicals” leeching into our nation’s aquifers.
Getting Wet
Investors looking to test the shape of water for themselves might look first to Invesco S&P Global Water Index ETF (CGW), a broad exchange-traded fund that’s practically a survey course on the water business. Its 50 some holdings cover utilities, infrastructure, equipment, instruments and materials.
For a commodity, water has plenty to offer tech-minded investors attracted to companies and scientists boiling over with innovative ideas. The results have been good for investors and populations. From a performance perspective, water has been making a splash. Over the past 15 years, water industry firms have outperformed both the domestic and global equity markets as well as bonds, gold and real estate. Meanwhile, some 1.8 billion people gained fresh access to sustainable water services for the first time over the last two decades.
Carry an Umbrella.
Except for water-related ETFs, though, most should think carefully before splashing around in this sector. Water investment strategies can tilt toward regulatory complexity. Buying or leasing water rights directly means engaging with the authorities. Water rights are regulated by the government at all three levels – federal, state and local. Still, new investment ideas continue to emerge. Since last December, for example, investors have been trading water futures in California’s $1.1 billion water market via the Nasdaq Veles Water Index.
Before diving in, research a few of the water and technology ideas that appeal to you most. While water may be an increasingly scarce resource, finding the right financial advisor to validate your choices does not have to leave you wandering in the desert.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.
