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17 Aug 2017

Tap into the benefits of water investing 


Around 1 billion1 people around the globe still don’t have ready access to good, clean water. The global water supply is under unprecedented pressure as the climate changes, the population grows and infrastructure ages. Solutions are needed urgently.

Thankfully, innovative ways to tackle the problems of demand, waste and quality are emerging. And they are creating opportunities to invest in a long-term structural growth theme with real world benefits. The six main market drivers are:  

1. Emerging market growth: Improved living standards in developing countries have resulted in higher per capita water consumption. Greater urbanisation means greater need for additional sanitation and waste.

2. Rising demand: Water consumption growth has even outstripped population growth and the problem is only expected to get worse. Global demand is expected to rise by 40%2 by 2030.

3. Tackling inefficiency: Developed economies are still, in many cases, extremely inefficient in how they look after their water. In the UK, for example, 3,123m litres leak from water pipes each day3. Montreal is thought to lose around 40% of its water because of poor infrastructure4.

4. Water quality: Ageing infrastructure can create contamination problems, as we’ve seen in various high profile cases. The UN says severe pathogen pollution already affects around one-third of all river stretches in Latin America, Africa and Asia5.

5. Policy change: Measures and targets are being put in place to improve water quality. In China, for example, the most recent five-year plan included measures on air quality, water quality and soil. Water was a key part of the 2030 Agenda for Sustainable Development. There are also clear economic benefits from investing in water and sanitation: they include an overall estimated gain of 1.5% of global GDP and a US$4.3 return for every dollar invested in water and sanitation services6.

6. Changing weather patterns: Although the subject of climate change remains controversial, weather patterns are in flux. From flooding to rising sea levels, it requires good water infrastructure and better waste recycling.


Staying the course

An urgent problem requires robust and sustainable solutions; solutions which aren’t just based on charity but which also help developing countries address water availability through economic means. In our view, companies will play a vital part in providing them.

The market value of water sector companies is expected to reach $1 trillion by 2027. Water is already the largest sector in the global infrastructure market. It is also very diverse, combining stable, utility-type companies which supply and treat water, with higher growth infrastructure groups exposed to emerging markets. Three main areas of water development will keep the current strong:

  • Utilities: water suppliers and waste water post-treatment companies who operate facilities and networks to safeguard the global water economy.
  • Infrastructure: suppliers of pipes, pumps, valves and meters, as well as various consulting firms. Investments required to upgrade ageing infrastructure in developed nations is expected to drive growth in the sector.
  • Treatment: High growth potential for companies involved in wastewater and desalination as demand from developing countries is expected to rise. This includes suppliers of products and technology for the disinfection, filtration and desalination of water (pre-treatment).

Go with the flows

Water continues to rise up the legislative agenda and draw the attentions of investors and policymakers alike. Areas of structural growth are hard to find when a heavy government debt burden is depressing global growth. Inflows are increasing when net flows into conventional equity funds have stagnated. Water is starting to leave other asset classes in its wake. 


Help us turn the tide

At Lyxor, we recognise the scale of this opportunity, just as we do the importance of a future in which everyone has safe, clean water to drink. Together, we can tackle this challenge head on.


What you need to know

Access the water sector with the Lyxor World Water UCITS ETF

  • The Lyxor World Water UCITS ETF offers a simple, liquid, transparent way to access the water sector.

  • The Fund is based on the World Water Index. The index is drawn from the most liquid stocks of the S&P Global Total Stock Market Index. It comprises 20 companies which have the largest share of their revenues in the three water industries above – utilities, infrastructure or treatment.
  • It selects the largest five stocks from each activity, plus an additional five stocks based on their rank in percentage share of water revenues to bring the total number of components to 20..

  • The world water index has been live since October 2007.

  • The fund has assets under management of 579 million EUR (Lyxor ETF, as at 21 July2017).


All sources are as at 21 July 2017.


2.Water Resources Group





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