A combination of climate change and demographic shifts has created “structural growth drivers” within the water industry that could benefit investors, says Quilter Cheviot.
According to Caroline Langley, deputy fund manager of the Quilter Cheviot Climate Assets fund range, the growth potential of companies offering innovative solutions to the water industry is vast.
“Water is becoming increasingly scarce and as a result we need to be more efficient with it,” said Langley. “We need to find those companies that do more with less and put pressure on the laggards to act in a more sustainable manner.”
Langley said there are a number of growth drivers for the industry, with population growth driving demand, urbanisation altering where supplies are most needed and climate change exacerbating the supply demand imbalance.
“We also have intensive industries that require huge amounts of water. Electrification and the rise of artificial intelligence are increasing demand for semiconductors. This will continue to drive water demand as it is a key component of the manufacturing process. Pretty much every company and industry needs water and some need it in far greater quantities,” Langley continued.
Critics have dubbed the regulatory system in the UK as too complex and warned that with supply failing to meet demand, London and the South-east of England may soon run out of water. This does not take into account the global shortage, where 2.2 billion people do not have access to clean and reliable water sources.
According to Quilter, there are different ways for investors to access the water industry. As an example, Langley cited US company Xylem as an example of a water technology business that provides innovative solutions through the water cycle and American Water Works as a company that has invested significantly in infrastructure to maximise water efficiency.
In addition to established companies, investors can also gain advantage through looking at new and emerging companies, such as Veralto, which is focused on improving water quality and its use of IT platforms to analyse data to maximise water efficiencies.
“Understanding water’s whereabouts is a growth area for a world with less predictable climate,” added Langley.
