"It is estimated that as much as 80 billion US dollars per year will have to be invested in maintaining and upgrading water utilities worldwide," said Dresdner Bank investment expert Jörg Uhlendorf. This will not be possible without extensive privatization. "As a result, the business prospects for private sector water specialists are very good," continued Uhlendorf.
Investments in water offer opportunities
At first glance, the earth has an abundance of water, with more than 70 percent of the earth's surface being covered with water – undrinkable sea water. At 0.1 percent of the world's water volume, the reserves of fresh water are meager in comparison. Accordingly, the UN organization UNICEF estimates that one billion people have to do without clean drinking water, and the trend is dramatically on the rise. Water is not only vital for human nutrition but is also essential for agriculture, industrial production and the generation of energy.
"The sustained management of global water reserves is going to be one of the most important tasks in the coming decades," commented Uhlendorf. This also includes the transport of water as well as its treatment and purification. UNICEF reports that 2.4 billion people live without basic sanitary facilities and four billion have no functioning waste water disposal. This represents a social tinderbox, especially in the megacities of the developing and emerging countries.
Up to 80 billion US dollars per year will have to be invested in maintaining and upgrading water utilities worldwide
"The hour of the water specialists"
In many countries, water utilities are part of the public sector. However, because of tight budgets, the sources of financing for projects to maintain and improve the water supply have dried up. The World Bank estimates the global need for investment at 60 to 80 billion US dollars per year. "In view of this enormous need for capital, at least a partial spin-off and privatization of at least parts of the water utilities will be unavoidable. The hour has come for water specialists, who can look to a relatively steady and reliable growth field," explained Uhlendorf.
Investors can profit from high growth in this area. Dresdner Bank sees Veolia Environnement in France and Nestlé in Switzerland as promising individual stocks. Investors who prefer a broadly diversified involvement can invest in funds such as the Pictet Fund (LUX) Water (WKN: A0LFWM).
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