A few days ago, on March 22, World Water Day took place. It has been celebrated by the United Nations for 30 years now to remind people of the essential importance of water as a resource for life. In 2023, the theme of World Water Day was "Accelerating Change".
Indeed, accelerated efforts toward a better global supply of usable water seem urgently needed. While around two-thirds of the surface of our blue planet is covered with water, only 0.3 percent of the global supply is usable freshwater. Its availability is coming under increasing pressure, for example due to climate change or the growing world population. And this is already happening virtually on our doorstep.
This is because a rather unusual phenomenon occurred in some European countries in recent months - a winter drought. Major waterways such as the Po and Rhine recorded record low levels. In France, this led to less nuclear power generation, causing electricity prices to rise, compounding the impact of the Ukraine war and increased gas costs. Spain, Portugal, Italy and Turkey also received low rainfall, resulting in a decrease in water supply for agriculture and cities. In addition, the lack of snowfall in the Alps in France, Switzerland, and Italy will result in less snowmelt in the spring and summer. At the end of January 2023, snow water equivalent (SWE - a measure of how much liquid water is stored in snow) showed a deficit of 35 percent compared to the average of the past decade. With around 60 percent of the water flowing into Italian rivers coming from melted snow, this does not bode well.
In view of these developments, it is not surprising that politicians in Europe are now also giving intensive consideration to measures to manage water shortages. The measures range from drawing up appropriate plans and water-saving appeals to promoting more efficient water use and investing in the modernization of infrastructure.
The good news is thus: Awareness of the problem is growing, and governments, businesses and agriculture alike have recognized the need to act. Another piece of good news is that "quick wins" such as fixing leaks or reducing water waste are possible with comparatively little effort. But local repairs are often not enough. In many places, water infrastructure is aging and reaching the end of its physical life. This requires large-scale modernization. In Italy, for example, an estimated 40 percent of water does not reach end users as a result of leaks. And for London alone and its (waste) water system dating back to the Victorian era, it is estimated that around 25,000 liters per second seep away.
In terms of both financial scope and duration, the establishment of a modern global water infrastructure is a mammoth task. The imbalance between supply and demand is increasing in perspective. Therefore, to maintain our standard of living and to meet the challenges of climate change, increasing investments are required along the entire value chain of the water industry.
For this reason, the water sector also represents a long-term growth opportunity for investors. This is because there are sufficient solutions to the problem of scarcity. What is important here is that it is not a matter of promoting water scarcity! On the contrary, it is about investing in technologies that can sustainably alleviate the impending shortage or, ideally, avert it altogether. Companies whose products help to reduce water consumption and waste have potential. And investors can participate in such solution providers. The Allianz Global Water fund, for example, invests in shares of companies whose solutions make an active contribution to improving the supply, quality and sustainability of global water resources. These can be efficient network operators and companies specializing in infrastructure repair, as well as companies in the treatment industry or manufacturers of intelligent water technologies.
If you consider the breadth of challenges and investment opportunities presented by the topic of water, it becomes clear that this is not only promoting UN Sustainable Development Goals (SDGs) 6 - Clean Water and Sanitation. Naturally, this goal was the focus on World Water Day. Rather, the measures also pay into SDG 9 (Industry, Innovation and Infrastructure), SDG 11 (Sustainable Cities and Communities) or SDG 12 (Sustainable Consumption and Production). And this in turn does not seem out of place with the overriding importance of water as the "source of life".
