World Water Day: super-cycle in water infrastructure investment may be coming

Today is World Water Day. To say there is much to celebrate, not really.

The world's water supply has fallen more than 50 per cent over the past 60 years, yet demand is set to grow by 20 to 30 per cent by 2050. 

By 2025, 1.8 billion people will be living in countries or regions with absolute water scarcity. 

No wonder the UN said WWD 2023 is about accelerating change to solve the water & sanitation crisis, and how to keep hundreds of millions of people connected to clean drinking water.

Fresh equity needed

Major investment in water infrastructure is required if the world is to achieve United Nations Sustainable Development Goal 6, to ensure clean water and sanitation for all. The OECD estimates costs will exceed $1 trillion a year. 

Investment in the identification of solutions presents a considerable opportunity, but finance remains short of the levels required. Nations will need to spend in some cases more than 1 per cent of GDP, to address the water challenges at hand.

Investors, corporates and policymakers play a crucial role in this complex process, argues Katerina Kosmopoulou of asset manager J. Stern & Co. 

Kosmopoulou, who is a partner of the firm, its head of ESG and deputy manager of J. Sterm's World Stars Global Equity Fun, discusses the challenges ahead with Net Zero Investor.

"It is not just in developing nations where there is a water crisis," she stressed. 

"Some 10 million US households have no access to safe drinking water – with contaminants affecting water quality and century-old cast-iron pipes in parts of the water network," Kosmopoulou pointed out.

She revealed that, J. Stern & Co. as recently as January, doubled its exposure to water technology pioneer Xylem, having bought an initial position in November, taking advantage of a fall in its share price, following Xylem’s acquisition of peer Evoqua Water Technologies. 

"This reinforced the company’s position as the world’s biggest and most diversified water solutions provider," she explained.

Kosmopoulou anticipates a super-cycle in water infrastructure investment, with the water treatment and management markets accelerating on the back of an increased focus on water preservation and quality, tightening of regulations and water infrastructure growth in emerging markets.

She said she closely works with its investee companies to ensure that water usage and preservation considerations are fully integrated into their strategic planning.

Her firm was encouraged to see Nestle’s CHF 120m commitment on 100 ecosystem regeneration projects across its 48 bottled water business sites, as well as Meta’s goal to become water positive by 2030, restoring more water to the environment than the company consumes for its global operations, she revealed.

"Ultimately meeting our generation’s challenge will depend on the willingness of all players across the global water value chain to make their own contribution to the goals of water re-use, conservation and ecosystem management," Kosmopoulou concluded.