Greenhouse gas emissions and global warming dominate public discourse. But one of the sectors most affected by this phenomenon is somewhat off the radar of both public discourse and the markets, despite its significant impact: water. 

The water crisis is escalating rapidly. The World Health Organization (WHO) estimates that within four years, half of the world’s population will live in areas experiencing water stress. There is a segment of the capital markets that seeks to do its part to address this challenge by raising awareness of this sector through funds and ETFs focused on companies involved in the supply, treatment, technology, and management of water resources, or by developing indices that incorporate water risk for the largest-cap stocks, such as the TSC Water Security Index for the U.S. and for Europe (https://www.thomasschumanncapital.com/solutions). 

As has been the case with most ESG (environmental, social, and governance) funds and financial assets, returns on investments in water-related assets—such as those in the S&P Global Water Index, which includes 50 stocks from around the world, or the Calvert Global Water Fund, which includes more than 100 companies—have been in line with or slightly above the market average, with annual returns of 12.33% and 11.9%, respectively, over the past five years.

Source: S&D Dow Jones Indices