Access to clean drinking water has become a global challenge. Even though around 70% of our planet is covered by water, only around 3% is freshwater. According to the United Nations, there may be a 40% shortfall in freshwater by 2030.
This is driven by several factors but human activities, such as intensive agriculture and water-demanding industry as well as rapid population growth and urbanisation, exacerbate the problem. Ageing water distribution systems and the lack of wastewater treatment also contribute to water wastage.
Finally, global warming is also causing severe droughts in some regions, contributing to desertification.
"}},{"componentType":"sectionTitle","title":"Scarcity in several regions around the world"},{"componentType":"paragraph","title":"India: water by rail","richBody":{"value":"India is an emblematic example of the water crisis. The country has 16% of the world’s population, but only 4% of its water resources. As a result, nearly 600 million people experience water stress. In 2019, Chennai ran out of water for the second year running.
This forced the municipal authorities to establish a new train service which supplied 10 million litres a day to the city’s 10 million people over a six-month period. India’s sixth most populous city illustrates the challenge that the entire Indian subcontinent is facing. And the situation is only set to get worse: by 2030, India’s water demand is projected to be twice the available supply.
"}},{"componentType":"paragraph","title":"Drought in Australia and South Africa","richBody":{"value":"India is far from being an isolated case. Eastern Australia, from Queensland to Sydney, is also edging dangerously closer to a ‘Day Zero’ crisis, leaving taps dry. The region has experienced repeated, unprecedented droughts.
In December 2019, a drought was declared in the entire state of New South Wales. One year earlier, the City of Cape Town in South Africa also almost endured a water crisis. This threat led even South Africa to consider solution such hauling an iceberg from the Antarctic to its capital city.
Given that dam levels in South Africa have dropped by 10% to 60% compared to 2018, this problem is particularly concerning: around 21 million of the country’s 60-million population do not have access to running water.
"}},{"componentType":"paragraph","title":"Large cities also affected","richBody":{"value":"Other cities that have also experienced severe water shortages in recent years include Sao Paulo (population: 20 million), Beijing (population: 21 million), Cairo (population: 16 million), or even Jakarta (population: 10 million).
But the list also includes some unexpected names such as Moscow (population: 12 million) and London (population: 5.5 million). Although the United Kingdom has a reputation for frequent rain, it is also at risk of water shortages by 2050 due to climate change.
"}},{"componentType":"sectionTitle","title":"Consequences for 25% of the world’s population"},{"componentType":"paragraph","richBody":{"value":"According to the World Resources Institute (WRI), 17 countries, housing 25% of the world’s population, face ‘extremely high’ water stress. Each year, industry, agriculture and cities in these countries consume 80% of the available surface or groundwater.
If we include countries that face ‘high water stress’, this figure rises to 30% of the world’s population.
Of the 17 countries most at risk, 12 are located in the Middle East and North Africa, a largely desert region that is seeing the brunt of the consequences of climate change. According to the World Bank, this is expected to cause economic losses estimated at between 6% and 14% of GDP by 2050.
"}},{"componentType":"sectionTitle","title":"Three ways to reduce water stress"},{"componentType":"paragraph","richBody":{"value":"Access to water is such a vital issue for humanity that initiatives and progress abound. And investors have been quick to note the efforts of companies behind this progress.
Since end 2009, an MSCI index of companies that derive at least 50% of their revenues from products or services in sustainable water has grown by 310% (in EUR). This increase is almost 50% higher than the growth of the MSCI World Large Cap Index.
The outlook continues to be very promising. Investing in these companies is a high risk with a particularly good return.
Innovative and pragmatic solutions for addressing water scarcity already exist. They are implemented by companies specialising in wastewater treatment and recycling, water infrastructure or the reduction of water consumption by agriculture and industry.
Currently, there are three main pillars of thought.
To avoid water wastage in agriculture, we need to improve water efficiency across the entire sector: 70 to 90% of the freshwater supply is used in agriculture in some countries!
To reduce this consumption, farmers can opt for seeds that require less water or study and better understand their soil to optimise their irrigation techniques. No two fields are the same and water requirements can vary greatly depending on the lay of the land. Drip irrigation systems can improve water efficiency by 95% and reduce the volume used by more than 60% compared to traditional irrigation methods.
Consumers can also make a significant contribution by reducing food waste and meat consumption. In fact, food waste accounts for about a quarter of the water consumed by agriculture.
"}},{"componentType":"paragraph","title":"2) Invest in green and water infrastructure","richBody":{"value":"Water stress can vary depending on the season and green infrastructure, such as wetlands or river basins, can thus play a significant role in harvesting rainwater.
One of the world’s largest irrigation projects was recently inaugurated in the state of Telangana in India. During the monsoon season, it pumps 85 million m³ of water into the Godavari River, helping to irrigate 1.8 million acres of land with a network of barrages, tunnels and canals.
Modernising infrastructure (pipelines, barrages, desalination plants, etc.) must thus be a priority to preserve freshwater. In the United States, most water and wastewater systems have worked around the clock for over 100 years, according to the American Water Works Association. Water main rehabilitation is estimated to cost around USD 1 trillion in the next 25 years, an effort that will require public and private capital.
"}},{"componentType":"paragraph","title":"3) Treat, recycle and reuse","richBody":{"value":"Instead of thinking of wastewater as waste, we need to think of it as a resource that can be recycled and reused. Wastewater treatment would allow us to better meet water demand, even during periods of drought. And yet, more than 80% of wastewater around the world and up to 95% in some countries is still discharged without treatment.
The challenge is therefore to find efficient methods that are also economically viable. Currently, microorganisms are used to break down pollutants. However, this energy-intensive process generates sludge that also needs to be treated. Currently, this process accounts for up to 35% of the energy budgets of American cities.
But there are also solutions: some microorganisms generate electricity or heat by breaking down waste. This energy could then be used to power treatment and reduce its cost.
"}},{"componentType":"sectionTitle","title":"Conclusion"},{"componentType":"paragraph","richBody":{"value":"Rather than a distant threat, the water crisis is already here. However, solutions exist, and the organisations that devise them can play a key role in managing this challenge while creating economic value and rewarding their shareholders.
If you wish to personalize your investment portfolio with this theme, feel free to discuss it with your Private Banker or Portfolio Manager.
"}},{"componentType":"sectionTitle","title":"Do you want to know more? Do not hesitate to contact us"},{"componentType":"cards","cards":[{"componentType":"serviceCard","cardType":"service","cardSize":"small","title":"Already an ING Private Banking client?","intro":"Contact your Private Banker via the ING Banking app!","image":{"transformBaseUrl":"https://assets.ing.com/transform/4c8f79aa-f653-430e-bd15-7a94e7640b59/Fingerprint-phone-hand-spot","type":"image","width":615,"original":"https://assets.ing.com/m/6e6f3de4c512a23f/original/Fingerprint-phone-hand-spot.png","extension":"png"},"link":{"url":"/en/private-banking/contact/contact-us-private-banking"}},{"componentType":"serviceCard","cardType":"service","cardSize":"small","title":"Want to find out more about Private Banking?","intro":"Leave us your details and we will get back to you!","image":{"transformBaseUrl":"https://assets.ing.com/transform/67010ed0-a27d-4c66-b37c-a6bfb9a308c2/icon-Video-call-woman-spot","type":"image","width":847,"original":"https://assets.ing.com/m/7e02e75f5d5f534d/original/icon-Video-call-woman-spot.png","extension":"png"},"link":{"url":"https://www.ing.be/en/individuals/services/contact-us-appointment?journey=invper&flow-step=call-me-back"}}]}]}}}