Water and the Stock Market

Published on December 15th, 2009 | by

When astronauts first went into space and took those seminal photographs of the Earth it was obvious to everyone that Earth was and is a blue planet. Without water, none of this is possible. There are some great statistics about water to emphasize just how integral and essential it is to life: 70% of the Earth is water. 60-70% of the human body is water. A human being won’t live more than a few days without water. The debate and legal wranglings over whether water is a basic human right or a commodity rage on, and as with most things, it comes down to the money.

Photo Credit: HypergurlMoney and Human Rights in the Growing Water Crisis
Money and Human Rights in the Growing Water Crisis

In an idea world, everyone has everything they need to ensure their survival and dignity- but in the world we live in it’s not that simple. The reality is that water will only become more scarce and thus more important, possibly replacing oil and food as a catalyst of conflict. Water is going to have a major impact on the financial markets around the world- so if you’re someone who plays with the stock market, what do you do?

Alex Miles, experienced water investment manager and former lead on one of the first water hedge funds, gives a good, succinct version of the bottom line:

“If water were not viewed as a human right, it would be a great investment.”

Miles compares water shortages to gravity, describing both as inescapable, with the certainty that comes from studying events in real-time and dealing with them on a day-to-day basis rather than looking at it from an activist’s perspective. You will not find the investment community talking much about new ways to access water or how to conserve- what you will find is a very stark, objective perspective on the state of water in the world. Demand is going up and supply is going down.

Miles recommends a few different moves from the imminent and very real realities. He says that the best investment to profit from as the water crisis grows more severe is grain, followed by other soft commodities. Why? Because water prices will rise as need increases, but not as quickly as the prices of the food that water is used to create.
Another investment opportunity is in privatized water management.

There are a growing number of markets around the world where water is privately controlled and managed, including the UK and France. Companies like Suez, Vivendi, and RWE are alternately viewed as ensuring that clean, sanitary options for water distribution are available or as violating the basic human right of clean water in developing nations where they have instituted monitoring devices on the ground pumps, allowing people access only when they have paid the company. At this point, 9% of the world’s water is privatized. With increasing demand and the backing of the World Bank and the IMF, look for that number to go up.

The bottom line is that water has become a commodity, even as it is defined as a human right- and how this juxtaposition plays out will have a lot to do with what life is like in the coming decades.

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