RobecoSAM, the sustainability investing arm of Robeco, is foreseeing a rebound in the global water market, expecting assets invested in this thematic to reach $1trn (€907bn) by 2025.
According to recent researches led by the manager, four key megatrends are shaping the global water market : demographic change, ageing infrastructure, higher water quality standards and climate change.
RobecoSAM forecasts companies that are early to respond and take steps to capitalise on the market opportunities associated with solving water-related challenges to “gain a competitive advantage and achieve commercial success.”
The manager said that population growth, urbanisation and industrial production needs put the pressure on the demand for water and access to clean and safe water.
RobecoSAM has identified four “attractive” investment opportunities “according to their respective risk characteristics in terms of equity market volatility and beta”:
– Utilities that supply water and provide wastewater services to residential, commercial and industrial sectors.
– Capital goods & chemicals: companies that manufacture water equipment such as valves, pumps, integrated water treatment systems, water treatment chemicals, and irrigation systems across the entire water value chain.
– Construction & materials: companies that build infrastructure such as water networks, pipelines, water channels, reservoir and treatment plants, or install water meters, which are often linked to commercial, municipal and infrastructure construction projects.
– Quality & analytics: companies that develop and sell products and services linked to water quality monitoring and testing, systems to treat water at its point of us, and water resource protection.
Daniel Wild, head of Sustainability Investing Research & Development at RobecoSAM, explained : “Despite global economic difficulties, we are seeing a rebound in the water market. This is being driven by two key developments.
“Firstly, water scarcity has reached a point where the damage cost of not solving the issues has exceeded the cost necessary to solve them. Secondly, there is currently a lot of liquidity in the market and investors are looking for opportunities with consistent returns and controlled risks – characteristics that investments in the water sector, and specifically in water infrastructure, hold true.”
Junwei Cai-Hafner, equity analyst at RobecoSAM, commented : “New environmental standards, increasing regulations on water quality, especially on industrial wastewater, as well as the upward trend of tariffs to enable cost recovery, all have a significant impact on the growth of individual segments of the water market and, consequently, on the attractiveness of companies doing business in these segments.
“We find that companies focusing on advanced wastewater treatment, improving water quality, and providing water reuse are interesting long term investment opportunities.”