World water day – investing in the water sector
Written by Ilonka Oudenampsen
Investing in the water sector could offer great opportunities, as the World Bank estimated that US$180 billion of water infrastructure investment is needed each year until 2030 to meet freshwater demand.
In light of world water day today, Simon Gottelier, investment manager of listed equities at Impax Asset management, said that this urgent need for vast amounts of capital investment is quickly gaining recognition.
Future water sector growth will stem from required investment in the emerging markets driven by migration and urbanisation and increasing levels of affluence; the transfer of technology from the developed to the emerging markets; recent under-investment in developed markets and demand for upgrades; and corporate activity, as a significant number of attractively valued businesses in the sector are still logical and compelling takeover targets despite a prolonged round in M&A in the water infrastructure and treatment markets between 2003 and 2005.
According to Gottelier, investment opportunities are found in three main areas: water infrastructure, water treatment, and water utilities.
Water infrastructure offers high growth, particularly in the emerging markets where mass urbanisation is driving government investment. Companies in the water treatment sector offer a combination of attractive emerging market growth as well as an element of earnings stability. Water utilities offer defensive qualities which are appealing in volatile markets.