AIDAN BAILEY sheds light on how water – traditionally treated as a public good – is fast becoming a tradable commodity.

Commodities have dominated the newspapers recently, with gold prices soaring to record levels and a barrel of oil costing $147 in July 2008. But very little is mentioned about water.  Specifically, the global shortage of the most essential commodity on earth – clean, drinkable water.

          Water, at least in the developed world, is probably the commodity most taken for granted, perhaps because we supposedly have so much of it.  While almost 70 percent of the earth’s surface is covered in water, 97 percent of this is salted – unfit for human consumption, crop irrigation or industrial use. And from the remaining three percent of the world’s water resources, only one percent is readily available for human consumption.

          Rapid industrialisation and increasing agricultural use have contributed to worldwide water shortages. Take China as an example, where globalisation has outpaced the availability of water and water infrastructure. Around 400 of China’s 600 largest cities don’t have sufficient water and more than 300 of these have polluted groundwater. In fact, China is in the unenviable position of having 20 percent of the world’s population but only seven percent of its water. But this isn’t just a developing country problem. In the UK, there are regular drought regulations. And recently, several Canadian and US states bordering the Great Lakes signed a pact banning all large-scale water diversions from that source.

          Like any other scarcity, a shortage of water creates investment opportunities. Recent years have observed an upsurge in the demand for investments seeking to profit from the need for clean, fresh water. This trend is set to continue. Moody’s, a leading provider of financial information, expects world water consumption to double over the next 20 years. So you can expect a plethora of new investments providing exposure to this precious commodity – increasingly referred to as “blue gold”. There are several ways to include water exposure to your investment portfolio and with a bit of research and guidance from a trusted financial adviser you could benefit.

H₂O Highlights

·         To grow one kilogram of rice you need 4,000 litres of water.

·         It takes 11,000 litres of water to produce the feed that goes into the bit of the cow which ends up in a Double Cheeseburger.

·         450,000 litres of water is needed to manufacture just one car.

Aidan Bailey BA (Hons) CertPFS AWP^CM 

General Manager Singapore, International Division