The great water crisis
When it comes to liquid investments most fund managers are firmly focused on oil. But are they missing a trick? There are many excellent reasons to invest in “black gold” – the rising demand from Asia and the tight supply situation to name a few – but oil is not the most important, nor the most scarce liquid out there, fresh water is. Water may cover two-thirds of the earth’s surface but of that a mere 0.01% is actually usable). And, as our populations and economies grow, it is becoming clear that there isn’t enough to go around. Parts of Africa are constantly in a state of drought; there were droughts all over Europe last summer; and huge areas in the north of India are frequently short of water, as is much of China.
This situation will only get worse. Over the past 25 years, China’s urban population has increased by 340 million. Feeding a rising population is very water-intensive (every tonne of rice absorbs 2,000 tonnes of water before it is harvested, for example). Supporting an urban population is even more water-intensive (families living in cities use twice as much water as those in the countryside) but supporting an industrialising urban population is about the most water-intensive of all. To produce one tonne of steel takes 20,000 gallons of fresh water.
Already 40% of the Chinese people live on an indequate amount of water, with hundreds of millions of people forced to drink contaminated water every day. At the same time, 80% of all diseases in developing economies stem from consumption of and exposure to unsafe water, and 50% of the world’s hospital beds are occupied by people with those diseases.
The problems don’t stop with developing countries: only about 50% of the water that comes out of Russia’s taps in drinkable, in London 60% of the water pumped is thought to be lost through leakage and in the USA much of the water infrastructure is more than 100 years old. By 2025, say researchers at the Centre for Strategic and International Studies, poor water infrastructures and the lack of water in general will mean that 30% of the global population will face shortages.
All this means that the world will have to stop wasting water and start thinking seriously about both preserving and enhancing global supply. This in turn means that there is about to be boom in water infrastructure – in desalination plants, filtration systems, pipelines and water pumps. Many stocks listed around the world are worth looking at if you want to buy into the boom – the Singapore-listed water treatment firm Hyflux or Germany’s RWE, for example – but for good all-round exposure you might look at Pictet’s dedicated water fund (Pictet Water) which invests globally in everything from infrastructure engineers and water treatment firms to bottled water producers.
Written by Merryn Somerset Webb, Editor of MoneyWeek. Her views are
personal and investors should always seek professional advice - Read
her article every month in Saga magazine.
This article was created: 16 November 2006.
This article was last edited: 18 April 2007.
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