The Earth should really be called “water”, because 71 percent of our planet is covered with water. Water in abundance, but only 1 percent of all that water is clean and accessible freshwater. Of that, two-thirds goes to agriculture and other food. The need for water increases with the growing population, a population that is also eating more meat.
Water consumption
A kilo of grain requires about 1,500 litres of water, and a kilo of meat easily requires ten times that amount. People cannot live without water or air. Water and air belong to no one and therefore belong to everyone. The tragedy of this common property is that it has become a global waste bin.
Now water is rapidly becoming more expensive. In California, water prices have doubled this year. The Nasdaq Veles California Water Index (NQH2O), consisting of an average of five different locations of water rights, now stands at $936 per one-acre foot. That unit is enough to put 1 acre of land (over four thousand square metres) under 1 foot (over 30 centimetres) of water.
Surface water is rapidly becoming polluted
Climate change is reflected in extreme weather conditions, including extreme droughts such as in California. According to NASA, 21 of the 37 aquifers in the world are being depleted. Other water sources such as surface water are rapidly becoming polluted. In China, about 80 per cent of the surface water is not drinkable and 90 per cent of the groundwater in the big cities is polluted.
Too much water is wasted, too little water is reused and more needs to be invested in security of supply. In the United States, 14% of daily household water consumption is lost through leakages. In the United Kingdom’s outdated system, the figure is 25 per cent, with London approaching 50 per cent. That water is not even used, let alone available for reuse. Yet, according to the World Resources Institute, by 2025, two thirds of the world’s population will live in areas where water scarcity is a problem. This is not just in California, India or the Arabian Peninsula; worldwide, a gap of no less than 40 per cent between supply and demand will open up in the next 15 years. The price of water can only go one way and that is up.
Search for clean water
If there is not enough clean water, more must be created. Desalination plants are an expensive solution. The cost depends mainly on the energy cost, perhaps enough alternative energy someday will help. After all, the marginal costs of sun and wind are zero. There are also new desalination technologies in development, such as with the use of graphene. In time, this could even transform deserts into irrigated farmland. Efficient water use is essential here.
There are already techniques for continuing to produce the same with 90 per cent less water. Here, too, modern technology such as the Internet of Things, smart meters that detect leaks in a system and communicate when there is enough water, will help. Upgrading existing infrastructure will ensure that less water is lost.
Water-rich agricultural land is rapidly becoming scarcer. The best way to save water in the world is to grow food right here and export it to drought-stricken areas. Now food is all too often grown in the dry areas, which are turning into deserts at an even faster rate. California produces 80% of the world’s almonds. Almonds alone consume 10% of all the water available there. It would be better to grow these almonds in areas with a surplus of water.
Time for a Water Footprint
Just like the Carbon Footprint, there is also such a thing as the Water Footprint. More and more companies are paying attention to their water consumption, also because water is becoming more and more expensive. A stress test on water prices shows that rising water prices affect no less than half of all company profits in the world. According to the World Health Organisation, every dollar invested in water and sanitation generates as much as USD 4.30. Biden’s infrastructure plan allocates $55 billion to improving water infrastructure and other water-related investments.
Companies that make products to save and filter water will benefit. Investing in those companies is investing with impact, as their products have a positive impact, both on society and the environment. And such investments are becoming popular; we can expect more money to flow to them in the coming years, which is all good for the ultimate return.
Han Dieperink is an independent investor, consultant and knowledge expert for Fondsnieuws. Earlier in his career, he was chief investment officer at Rabobank and Schretlen & Co. He is currently chief commercial officer at Auréus Asset Management. Dieperink regularly provides his analysis and commentary on the economy and markets.