Water – A Source of Life and Investment Opportunity July 15, 2020

Water – A Source of Life and Investment Opportunity


  • Access to water is crucial for the wellbeing of a nation’s population and its economic performance
  • The rapidly growing population is creating an insatiable demand for water
  • However, climate change is reducing the freshwater supply on earth and aggravating the water scarcity crisis
  • The growing demand and depleting supply of water represent defensive and offensive investment opportunities in the water industry
  • Investors can gain exposure to the water industry via ETFs like PHO, FIW and PIO


Water is one of the planet’s most precious and widely used resources. In addition to being vital for our survival, water is a key component in our domestic, industrial, manufacturing, agricultural, energy and food production activities. Access to water is a basic human right and it is crucial for the wellbeing of a nation’s population and its economic performance.

Unlike other more illustrious commodities, such as oil and gold, we often take water for granted in our daily lives due to the abundance and availability of this liquid in most developed cities around the world. However, water scarcity is a growing global threat.

Insatiable Demand for Water

According to the World Health Organisation (WHO), 785 million of the world’s population do not have access to basic drinking water services and at least 2 billion people draw their drinking water from contaminated sources.1

The predicament is unlikely to improve in the future. It is estimated that the world’s population will reach 9.7 billion by 2050 and the demographic changes will accelerate the surge in demand for water.2 The rapid population growth will escalate competition between water users and the planet may face a 40 percent shortfall in water supply by as early as 2030.3

As an essential commodity, demand for water will continue to rise in tandem with the growing population. Hence, demand for water is less dependent on the economic cycle. This translates into more consistent revenue streams for water companies and the ability to distribute reliable dividends to their shareholders. For example, America Water Works (NYSE: AWK), the largest publicly-listed water company in the US, has been steadily increasing its quarterly dividend payout for the last ten years.4

Depleting Supply of Water

Although two-thirds of Earth is covered by water, only a fraction of it is available for drinking and global warming may affect this limited freshwater supplies. The long-term impact of climate change is uncertain but it is predicted that these changes will further aggravate water scarcity.5

The warmer climate will intensify the rate of evaporation and reduce water level in water bodies – directly diminishing the water supply from these natural sources. The rising rate of evaporation will heighten precipitation but the increased rainfall or snowfall will not be distributed evenly. The resultant effect will be more frequent extreme weather conditions like flash floods and prolonged droughts in different parts of the world.6

Regions experiencing drier conditions will encounter water shortages whereas wetter regions having heavier burst of precipitation may be faced with incessant flooding. Heavier rainstorms will increase surface runoff, that flushes pollutants and sediments into nearby water bodies. The decline in water quality will increase the cost of water purification, reduce the potential volume of water available for use and affect the health of the surrounding inhabitants.

Extreme weather conditions can also damage water infrastructures, making infrastructure management and maintenance even more complex and costly for water companies. To illustrate, the damaged pipelines or dams may cause water loss through leakages and inadvertently reduce the supply of water.

Growth Opportunities in the Water and Water-Related Industry

For many companies, water efficiency is both a business necessity and commercial opportunity. The growing global population and economies are placing a huge burden on the already-depleted water supplies.

As a result, water usage and prices are heavily regulated by the authorities to ensure that the local populace have rights and priority of access to the resource. In 2004, PepsiCo (NASDAQ: PEP) and Coca-Cola (NYSE: KO) were forced to shut down their bottling plants in India after concerns were raised that they were competing with the local farmers and cities inhabitants for water.7 Global water scarcity can potentially cease businesses and companies must adapt their operations in order to survive.

Given the water scarcity crisis, there is a pressing need for countries and companies to increase their spending on water and wastewater treatment facilities. According to the Global Water Intelligence, operating and capital expenditures by utilities and industrial water users on water and wastewater, is expected to grow from US$770 billion in 2018 to US$914.9 billion by 2023.7

The growth opportunities for water products and services can be found when the productivity of these three areas is improved – (i) water treatment and distribution, (ii) water-intensive industrial and power processes and (iii) water usage in agricultural activities.

Examples of Infrastructures and Technologies Used to Increase Water Efficiency6

Water Treatment and Distribution
  • New infrastructures such as treatment and desalination plants
  • Membrane technology for wastewater treatment
  • Sewage systems to collect wastewater and precipitation
  • Domestic products that are able to reduce usage or reuse water for other household purposes
Industrial and Power Processes
  • Radical water in bottling processes
  • Dry or closed-loop cooling systems in power plants
  • Water flow control and automatic shut-off valves in textile production
  • Tracking tools for water usage
Agricultural Activities
  • Genetically modified seeds that require less water
  • Drip irrigation technologies

Exchange Traded Funds

Water-themed Exchange Traded Funds (ETFs) provide investors access to a wide variety of stocks in the water industry, including water utilities, infrastructure, equipment and materials companies.

ETF Invesco Water Resources ETF First Trust Water ETF Invesco Global Water ETF
AUM USD 1.06 billion USD 488.85 million USD 202.8 million
Expense Ratio 0.60% 0.55% 0.75%
Number of Holdings 36 36 49
Top 3 Holdings
  • Danaher Corp (NYSE: DHR)
  • Roper Technologies Inc (NYSE: ROP)
  • Ecolab Inc (NYSE: ECL)
  • IDEXX Laboratories Inc (NASDAQ: IDXX)
  • Danaher Corp (NYSE: DHR)
  • Agilent Technologies Inc (NYSE: A)
  • Danaher Corp (NYSE: DHR)
  • Geberit AG (SW: GEBN)
  • Ecolab Inc (NYSE: ECL)

ETF information is accurate as of 22 June 2020


The water industry is thriving with an immeasurable and growing demand. The stable demand for water means that water companies may be suitable as a defensive position in an investment portfolio.

Furthermore, the dwindling natural supply sources may provide an offensive play for investors as water companies look for innovative ways to conserve and purify water for its consumers. Investing in the water industry is an alternative option for investors looking for long term growth opportunities.

If current structural trends were to continue and water companies continue to adopt emerging technologies, the water industry may just be the catalyst for investors to diversify and tip their investment portfolio over the boiling point.



These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com