What next for global water shortages?

The United Nation’s (UN) water summit took place in March this year in New York, coinciding with World Water Day.

| 4 min read

It was the UN’s first major conference about water since 1977 and the report from the summit was a reminder about the scarcity of the world’s most essential commodity – and that for many people across the world, water shortage is a daily event.

Water isn’t just a luxury to have, it is essential to our lives and one of the world’s most precious resources. Water is also vital for many companies to produce their finished goods – including the agricultural, fashion, mining, and energy industries.

The fashion industry is the second-largest global polluter of freshwater resources (after agriculture). The UN reported in 2019 that 7,500 litres of water are needed to make a single pair of jeans (including the dyeing process) – this is equivalent to the amount of water the average person drinks over a period of seven years. The fashion industry is responsible for at least 20% of global wastewater.

Access to clean water

Globally, two billion people do not have safe drinking water and 3.6 billion people lack access to safely managed sanitation – these numbers are expected to grow in line with population growth and increasing industrial development. The rising population will continue to add to water usage, driven by demand for growing water-intensive agricultural crops and electricity generation that is dependent on water for cooling. On the supply of water, climate change and shifting weather patterns are making the distribution of rain less predictable, as seen by the increasing global floods and droughts around the world.

In the UK, thankfully, we don’t have many droughts. But, when we do, we are often shocked and wonder why when we seem to have a lot of rain, but the UK is not actually as wet as we think. Although it does rain here (last month was the wettest March in England in more than 40 years), it doesn’t rain everywhere all the time.

While our temperate climate brings frequent rain – an average of 133 days usually – our changing weather means that dry spells can come at any time of the year. In fact, London gets on average 106 days of rainfall a year, and only around 600 millimetres of rain, about half the average rainfall of Sydney, Australia.

A problem with our water supply in the UK is our Victorian pipes infrastructure. Approximately 23% of the UK public water supply is lost to leaks every year, but with over 200,000 miles of pipes, most of them underground, finding and fixing leaks is extremely difficult. Apparently, replacing every pipe in the entire network would still only cut leaks by half.

UN sets priorities for water equality

The UN listed many opportunities to ease the world’s global water problems, including:

  • Technology and digital companies: from desalination to disinfection, innovative companies are developing ways to make water more readily available and safer.
  • Utilities: as well as their legacy business of providing and managing water supplies, utilities are at the forefront of the ‘internet of things’ as they deploy sensors and automation to run the world’s water infrastructure more efficiently.
  • Engineering: water is a vital input when creating everything from chemicals to fabrics, so engineering companies have deep expertise in conserving this natural resource.
  • Energy: shale oil and gas cannot be accessed without vast quantities of water, often long distances from water sources, so energy groups are pioneering solutions for water transport and onsite recycling.

The L&G Clean Water UCITS ETF (an index tracking product) is one way to invest in some companies that are in the industrials sector, as well utilities and technology companies. Legal & General have partnered with Global Water Intelligence, a leading specialist team with backgrounds in journalism, finance, economics, water, and technology, to create and manage the index being tracked by this ETF.

The ETF currently invests in 56 companies that are actively engaged in the international clean water industry through the provision of technological, digital, engineering, utility, and other services. Companies included in the ETF must report a revenue stream from water- related activities – for utilities companies this is at least 90% of their annual revenue, for engineering companies the revenue stream is 50% and for technology/digital companies this is 10%. Companies that are in the ETF are then equal weighted based on their daily trading volume in the stock markets. This ETF contains approximately 58% mid and 18% small-cap companies.

More from Lynn Hutchinson: The rise of automation

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What next for global water shortages?

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