INVESTMENT IN WATER FUND

Water scarcity has been on scientists’ minds and humanitarian organisations’ agendas for some time, but it seems that despite some daunting figures, the alarm bells are just not loud enough.

Global Water Resources
About 70% of the earth’s surface is covered in water, but 97% of it is saltwater, which is unfit for human use. Saltwater cannot be used for drinking, crop irrigation or most industrial uses. Of the remaining 3% of the world’s water resources, only about 1% is readily available for human consumption.

Global Shortage
Rapid industrialization and increasing agricultural use have contributed to worldwide water shortages. Areas that have experienced water shortages include China, Egypt, India, Israel, Pakistan, Mexico, parts of Africa and the United States (Colorado, California, Las Vegas and the East Coast), to name but a few.

Pollution also highlights the need for clean water. In the U.S., the dead zone off the Gulf Coast highlights the impact of fertilizer runoff, and methyl tertiary butyl ether (MTBE), an additive in unleaded gasoline, can be found in well water from California to Maryland. Overseas, highly publicized incidents in Russia, China and elsewhere demonstrate that pollution isn’t limited to the West. Of course, fouled water supplies further limit the amount of fresh water available for human use.

Indexes
Like any other scarcity, the water shortage creates investment opportunities, and interest in water is at an all-time high. Here are some of the more popular indexes designed to track various water-related investment opportunities:

• Palisades Water Index – This index was designed to track the performance of companies involved in the global water industry, including pump and filter manufacturers, water utilities and irrigation equipment manufacturers. The ticker symbol for the Palisades Water Index is ZWI. The index was set at 1000 as of December 31, 2003. It closed at 1351.08 on December 30, 2005.
• Dow Jones U.S. Water Index – Composed of approximately 23 stocks, this barometer climbed from 500 to 800 over the 12 months ending December 31, 2005. The ticker for the Dow Jones Water Index is DJUSWU.
• ISE-B&S Water Index – Launched in January 2006, this new index represents water distribution, water filtration, flow technology and other companies that specialize in water-related solutions. It contains 20 stocks. The ticker for the ISE-B&S Water Index is HHO.
• S&P 1500 Water Utilities Index – A sub-sector of the Standard & Poor’s 1500 Utilities Index, this index is composed of just two companies, American States Water (ticker: AWR) and Aqua America (ticker: WTR). In 2005, the S&P 1500 Water Utilities Index rose in excess of 45% .

Although not necessarily believing that the world will go to war for water, some think that we might witness the phenomenon of water refugees as soon as in the next 15 years, due to droughts and glacier retreats. According to the United Nations, about 50% of the world population will live in water-stressed conditions in the next 15 years.

Furthermore, the very nature of water makes finding a solution harder. Water is not fungible – unlike oil or other natural resources: it is not easily or economically transportable – it costs more to transport water than oil, the latter being heavier than the former; freshwater availability has been altered by climate change; and, finally, water is essential not only to human life, but also to pretty much all human activity, including agriculture and industry.

Recent years have seen an upswing in the demand for investments that seek to profit from the need for fresh, clean water. If the trend continues, and by all indications it will, investors can expect to see a host of new investments that provide exposure to this precious commodity and to the firms that deliver it to the marketplace. There are currently numerous ways to add water exposure to your portfolio – most simply require a bit of research.

 

Source: Investopedia