On World Water Day, KBI Global Investors outlines the immense challenges ahead for water conservation and how sustainable investing can make a difference.
This is the ultimate contradiction: water is priceless, but free. Without water, manufacturing stops, food does not grow, the economy collapses, and ultimately life ceases. It’s a difficult concept to understand, but when we pay for water, we are paying, with very rare exceptions, for its treatment and transportation.
As the world emerges from isolation and policymakers around the world seek to prioritize stimulus spending, it is worth highlighting the significant value that can be found in investing in the water value chain. . ”
The water itself is free. It is only in its absence or during periods of scarcity that this value-price contradiction becomes evident. As Benjamin Franklin said, writing in ‘Poor Richard’s Almanack’, “When the well is dry, we know the value of the water.”
Franklin’s observation highlights a critical point in World Water Day (first designated by the United Nations General Assembly on March 22, 1993 and held on the same day each year), with the 2021 theme, “Valuing Water”, shining the spotlight on the escalating global water crisis.
If it is only appreciated in its absence, the real value may not be in clean water itself but in the people and organizations that ensure its reliable supply; in other words, the value is in the value chain.
This value chain, says Matt Sheldon, senior portfolio manager on water strategy at KBI Global Investors, “requires major investment to serve a growing global population, increased industrialization, continued urban migration, changing demands of consumers and contaminant removal. Much of the investment is, Sheldon says, “just to fix what breaks,” and it is breaking at an increasing rate due to age, manifested climate change, and land subsidence. “To properly assess water, we as a society need to invest in it.
KBIGI has been investing in water through its dedicated water strategy since 2000. “We don’t buy low water and don’t sell high water,” said Catherine Cahill, another portfolio manager main. “On the contrary, we invest in companies all along the value chain, ensuring a reliable supply of drinking water. This diverse group of global companies serving municipal, industrial and agricultural clients represent a valuable and unique set of investment opportunities; they provide solutions that help us build a resilient and sustainable water value chain across the world. “
From KBIGI’s perspective, the value chain continues to grow stronger, with utilities rising to the challenge by adopting technologies that enhance sustainability and improve the customer experience.
For example, they offer more innovative solutions in the areas of treatment and reuse to allow businesses and public services to navigate a world increasingly tense by climate change. The pandemic has highlighted the value of digital integration, with advanced analytics and remote monitoring and controls helping to effectively find and resolve issues quickly.
The value proposition, said Sheldon, “is unmistakable for the end user,” with a noticeably positive impact on the company. “As the world emerges from containment and policymakers around the world seek to prioritize stimulus spending, it is worth highlighting the significant value that can be found by investing in the water value chain. “
A recent MSCI ESG Research study looked at 122 funds that explicitly include the topic of water in their investment objective. Only 16 funds were found to have exposure to sustainable water solutions of 10% or more, based on the weighted average income of the fund‘s holdings. (MSCI considers 10% or more to be high to very high exposure). KBI Global Investors has been identified as the manager of two of the top five funds.