“On fought for gold in the XIXe century, for oil in the XXe century and we will fight for water in the XXIe century “ : this premonitory sentence released by an expert speaker in a BBC documentary dating from the 1990s sums up the crucial interest of this natural resource, vital for humanity. In limited quantity on the planet, it is still missing as much.
A recent study by Meeschaert AM recalls that to date “More than 2 billion people do not have access to a secure water system”. And many experts predict a rise in water needs following an increase in the world population and a greater concentration of inhabitants in metropolitan areas. Another important issue: “Directly affected by climate change (droughts, floods), water and its quality are now in direct contact with issues related to sustainable development”, emphasizes Nicolas Bénéton, specialist in thematic products at Robeco. Sometimes referred to as “blue gold”, water has interested the world of finance in recent years. In a few years, new funds dedicated to this theme have appeared.
Contrary to popular belief, the water market has nothing to do with the production of plastic water bottles that pollute. “This investment universe is broad and concerns all the players who contribute to making water drinkable and who offer intelligent management of its use with the aim of achieving reasonable consumption”, summarizes Hervé Thiard, Managing Director of Pictet AM.
Distribution and analysis
Transversal and fragmented, the investment spectrum is organized into two major poles.
First, there is the one linked to the distribution of water called “community services”. “Companies deliver drinking water to consumers and ensure it is recycled. These last ones deal in particular with the maintenance of the underground distribution network, even of its restoration ”, explains Nicolas Bénéton. This activity, sometimes in the form of concessions, offers long-term visibility on the company’s turnover.
Necessary and recurrent, the renewal of these underground networks remains however dependent on the level of public order (States, cities). A town like New York would have a network in very poor condition with wooden materials dating from the 19th century.e century. ” In this area, there are also many opportunities in emerging markets, where the needs are great and the creation of distribution networks necessary. This is particularly the case of Brazil and China», Adds Arnaud Bisschop, Co-manager of the Thematics Water fund, at Thematics AM. Alongside these infrastructure-focused operators, an ecosystem has developed rich in subcontractors who manufacture the materials needed to repair or replace this large piece of equipment.
The other area of investment concerns technology-driven companies. Some have widened their furrows in the measurement of water quality and analysis. “Their technologies are useful in the field of environmental services as well as in the sector of health, pharmacy and nutrition”, specifies Nicolas Bénéton.
“Stable performance”
Others are developing services for individuals to help them use water sparingly and offer solutions to detect leaks or to manage consumption economically. Note that the strategy of the Allianz GI fund only targets companies responding to the “Urgent challenge of water scarcity, the supply of which contributes to improving the sustainability of the world’s water resources”.
Labeled sustainable and responsible, these funds often meet several United Nations sustainable development objectives related to water. “In the long term, a water fund demonstrates its resilience with stable performance in troubled times of the market thanks to a mix of mature companies (infrastructure, water supply and distribution) and technological growth stocks”, says Julie Berenguier, Marketing Director for Private Clients at Lyxor (Société Générale group).
Since its creation, Pictet Water “Served an average annual performance of 7.57%, compared to 4.51% for the MSCI World index, with lower volatility”, points out Hervé Thiard. Even if the year 2020 was not a good year for these vehicles which suffered from a rush of investors on values related to the epidemic (health biotech) and containment (digital and remote services ), they should rebound in the future. The stimulus plans initiated by various countries could, in the long term, benefit from the heavy investments of which this infrastructure is a part.