Governments and supranational organisations have a crucial role to play in helping the world secure its natural resources but they cannot solve these problems on their own – the private sector will have to make a major contribution, says Pictet Asset Management.
Overall, the world will need to invest USD1trn per year through to 2030 to safeguard its water resources.
It is against this backdrop that the water services sector can be expected to sustain its strong rate of growth, which is currently running at six per cent per year. For investors this presents an attractive opportunity; much of the industry’s expansion should come through the private sector. Private companies currently account for just eight per cent of the global water services market but this figure is expected to rise to 21 per cent over the next decade.
Water recycling will be crucial in reversing the world’s water shortage and has become a focus for local and national governments in both the developed and developing world. It is one area where the skills of the private sector are already being deployed to particularly good effect. Many of the largest companies in the water services industry have made recycling a priority, investing heavily in the research and development of new wastewater purification techniques.
The world currently recycles just 20 per cent of its used water – an unsustainably low level if it is ever to bring demand and supply into equilibrium. Promising successes in this area include Chile, a pioneer in the privatisation of water services, which now treats or recycles 90 per cent of its urban waste water compared to just eight per cent some 20 years ago. In Sydney, the percentage is closer to 100 per cent.
Technological breakthroughs are also being made in the area of water desalination, Here, private companies are developing technologies that reduce both the cost of desalination and its impact on the overall environment.
The Pictet-Water fund was launched in January 2000 to capitalise on this long term demand for water. The fund, which has over GBP2,010bn under management as at 28 February 2013, seeks capital growth by investing at least two-thirds of its assets in the shares of companies operating in the water and air sector worldwide. As at 28 February 2013 the fund had returned 98.99 per cent in Euro terms (Euro share class) since inception ahead of a -0.57 per cent loss in the MSCI World benchmark.
