Efforts to ensure universal access to clean drinking water and basic sanitation are faltering. An estimated two billion people across the globe don’t have safe drinking water, and a further 3.6 billion lack safely managed sanitation. We are also degrading the world’s water ecosystems at an alarming rate. Over the past 300 years, over 85% of the planet’s wetlands have been lost. Increasing acidification threatens marine life, while plastic pollution is choking the ocean.

In 2022, we saw multiple extreme weather events across every continent, with severe and devastating storms, droughts and floods. Heavy monsoon rainfall in Pakistan caused flash flooding and landslides, destroying 1.7 million homes, displacing 32 million people, killing 1,700 people and pushing nearly nine million into poverty.

Meanwhile, the Horn of Africa experienced the longest and most severe drought on record. Across Somalia, Kenya and Ethiopia, 21 million people now have food insecurity. This includes over three million people at ‘emergency’ levels or higher, meaning they will go days without eating and have been forced to sell belongings to buy food.

With a growing global population, solutions that enable more efficient use and management of water, as well as promote better care of our oceans, are essential to help meet the increasing demand and reliance on our water resources.

Within our sustainable funds, but also more broadly in core funds, we look for companies with strong runways for growth. Given the unmet need, companies whose products and services improve access to clean water and sanitation, and improve efficiencies in existing infrastructure, are tapping into significant revenue opportunities. There are also opportunities in companies showing water leadership by minimising water use, or reusing water as much as possible, which should also lower costs.

So where do we think there are opportunities?

One example of a business improving water usage is Tetra Tech, a leading resource management consultant specialising in water services. It helps clients across a range of water-related projects, from water reuse work in Mongolia and addressing water loss in Jordan, to groundwater replenishment and reuse in California.

Tetra Tech supports 70,000 projects across 100 countries around water reuse and conservation. These include flood prevention projects, stormwater management, wastewater treatment and managing water supplies. Where possible, the company uses natural solutions, such as the creation of a ‘living breakwater’ to stabilise the marsh shoreline and support biodiversity in Alabama. It also uses green stormwater infrastructure to transform the way stormwater is managed in Raleigh, North Carolina.

Last year, Tetra Tech helped treat, save or reuse 328,000 megalitres of water, while protecting, managing or restoring 178 million hectares of land and water. The company’s projects also avoided 20.6 million metric tonnes of CO2e.

Another company is DSM, a Dutch business specialising in health and nutritional products. These include food supplements and ingredients containing plant-based fish alternatives. The company offers vegan fish flavouring, as well as algae omega-3 alternatives and natural algal oil for fish feed. Just one tonne of DSM’s Veramaris natural algal oil saves catching 60 tonnes of wild fish to produce salmon feed, protecting marine biodiversity in our oceans.

Companies whose main business is not water-related can still improve their water management and consumption. Azure Power is just one example. A leading solar power company in India, Azure Power builds and operates some of the largest solar power projects in the country. However, India is a water-stressed nation and solar panels, which attract dirt and dust, require regular washing to work effectively. The company has introduced robotic solar panel brushes to keep water use to a minimum and it also recycles 50% of the groundwater it uses. The company is aiming for net water neutrality this year.

Final thoughts…

These are just a few examples of businesses taking action. As we see increasing demand and need for solutions, we believe corporates can offer innovative ways to tackle our water needs. In the years ahead, this will be increasingly essential as we work to ensure that life on earth can access clean, safe and plentiful supplies of water and that life in the oceans is protected.

Companies are selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance. Past performance is not a guide to future results.