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Rewriting the Future with Water Stocks

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Hydration, sanitation, farming, cooking; water is essential for preserving individual lives and for the successful functioning of society. Over the past two decades, increasingly more people have been connected to safe supplies of the substance. And while a looming global water crisis is still in our midst – see Flint, Michigan, or Cape Town, or more recently Texas and Taiwan – a water-stressed future is not written in stone. There are numerous opportunities to engage head-on with what would otherwise become a worsening situation: water scarcity corresponds with budding opportunities to invest in an essential resource that people will always need. We can thus make sure that supplies expand rather than constrict. 

Companies around the world are entering the market to help guarantee access to clean, safe, and consistent sources of water, while others have been involved in this battle for some time. Buying shares in such corporations at the time of their initial public offering provides them with funds for business operations and ultimately to execute their larger mission; and the more investors that back industry players on the stock market, the more pronounced the signal is that these companies have value. 

Reliable distribution of drinking water and the flow of wastewater are the most essential water-related services, and both are provided primarily by utility companies. American Water Works (AWK), based in Camden, New Jersey, is the largest American water utility that is publicly traded, providing services to more than 15 million people in 46 states. The company’s environmental impact is clear: it saves 3.3 billion gallons of water annually through its efficiency measures, and last year, the S&P Global Ratings ESG Evaluation Report gave it the highest score in the U.S. and second highest in the world. 

In order to provide such services, infrastructure ranging from dams and reservoirs to pipes and sewage tanks has to be maintained. The American Society of Civil Engineers (ASCE) reports that in the U.S., poor infrastructure causes about 6 billion gallons of water to be lost every day, so investments here can make a huge difference. The Water and Wastewater Equipment Manufacturers Association (WWEMA) estimates $750 billion will be needed over the next two decades. Essential Utilities Inc (WTRG), headquartered in Bryn Mawr, Pennsylvania, is already at work upgrading old piping; its subsidiary Aqua has invested over $2 billion in improvements of infrastructure since 2012, which includes replacements of over 800 miles of water main. 

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Water needs to be safe before people put it into their bodies or release it back into nature, so equally important are those companies engaged in water purification. Danaher Corp. (DHR), in Washington, D.C., is especially influential across its multiple subsidiaries. ChemTreat offers industrial water treatment to prevent occurrences like microbial contamination; it was Boeing’s 2019 Supplier of the Year in Sustainability for its treatment of the company’s cooling and boiler water.  Hach manufactures tools to test water quality, such as the PAH500 sensor, which makes sure the water used in ship exhaust scrubbing is sufficiently pure before it is released into the ocean. And Trojan Technologies operates the biggest ultraviolet disinfection facility in the world. 

Other companies ensure access to clean water not through the city and municipal systems, but through private methods like bottled water delivery: Primo Water Corporation (PRMW), based in Tampa, Florida, delivers directly to the doors of homes and offices in 21 countries. With over 900 million gallons of water sold each year, and as the first company to ever have a spring water source certified under the Alliance for Water Stewardship program, this corporation is expanding access to the packaged drink with the lowest water footprint. 

There are multiple possible benefits of investing in a company in the water market. As Matthew C. Sheldon, a senior portfolio manager at KBI Global Investors told the New York Times, “different investors come to water from different angles. Some are looking to dilute their other natural-resource exposures. Others are looking for an infrastructure play. Some have a strong interest in environmental, social, and governance investing. Some just want a diversifier.” Regardless of your motivation, these corporations and others like them are possible investment opportunities that will expand access to safe water and generate a handsome return.

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