In recent weeks, several global agencies have sounded the alarm on water scarcity, highlighting the negative implications of rising economic activity and climate change on supplies. The message has been consistent: water is not optional. In this article, Impax Asset Management notes urgent action, along with significant investment, is required to address water infrastructure needs.
According to the European Environment Agency, as much as two-thirds of the EU’s water bodies are ‘stressed’ as a result of pollution and supply scarcity.1 The agency calls for urgent improvements in efficiency and water pricing, and the introduction of mechanisms to fund much-needed water investments.
Around 20% of European territory and 30% of Europeans suffer from water stress every year; the EEA estimates the economic cost to be around EUR 9 billion each year.2
A separate study by Water Europe has projected that EUR 255 billion of investment is needed in Europe by 2030 if the region is to comply with water supply and sanitation regulations.3
These findings highlight the urgent need for decisive action and significant investment to address the region’s unfolding water crisis.
Water resilience – Investors have a role to play
In her October State of the Union address, European Commission President Ursula von der Leyen announced plans to develop a European Water Resilience Strategy for the current commission mandate (2024-2029). This move came after 21 member states called for the issue to be treated as a top priority for the region.
For the EU to achieve its goals for water resilience, significant investment is necessary. Impax has been focused on water solutions for over 20 years. Our water industry experts have an in-depth understanding of companies and the technologies necessary for the industry to meet its targets.
We believe there are exciting opportunities for investors in the drive towards greater water resilience.
Investment implications and opportunities
Within the household sector, there is potential for investors to support the reduction in leakages, better connection to water networks, and better sanitation.
In manufacturing – a water-intensive industry – there are opportunities in efficiency and recycling. These include high-growth areas such as the semiconductor sector and datacentres.
Within agriculture, the financing gap for farmers who intend to invest for green purposes amounts to EUR 18.9 billion.4
The water investment universe continues to benefit from more supportive policy and secular growth drivers in areas such as:
- Ultrapure water and recycling in the semiconductor and electronics industries
The investment costs of implementing advanced water purification technologies to achieve the EU’s chip production goal is estimated to be between EUR 191 million and EUR 228 million a year by 2030.3 Some companies in the sector and datacentres treat wastewater in their own facilities and reuse it. Other companies rely on public wastewater treatment facilities.
In either case, the use of water saving technologies can lead to significant financial and economic benefits. KLA*, for example, focuses on process control in chip manufacturing for the semiconductor and electronics industries. It supports efficient production and reduces the required volume of ultrapure water, essential for reducing freshwater usage and lowering operational costs.
- Improving public water quality
Households in the EU are almost entirely reliant on public water supply. According to the study3, investment costs for measures aimed at improving and protecting water quality across Europe are estimated at around EUR 142 billion.
Utilities such as Veolia* allocate a significant part of their capital to deploying and upgrading water treatment and distribution networks. Veolia implements advanced leak detection and repair technologies to minimise water loss in distribution networks. This not only conserves water but ensures that the water reaching consumers is of high quality.
- Improving irrigation in agriculture
Investment needs for sustainable water use in agriculture and food production are largely focused on irrigation technologies. Irrigation is a significant drain on water resources.
Tackling inefficient use of irrigation is key. Valmont Industries*, for example, supplies irrigation services to farms in over 90 countries worldwide with systems designed to maximise water efficiency.5 Its precision irrigation products enable real-time data monitoring, allowing farmers to make informed decisions about water usage based on soil and crop needs.
*References to specific securities are for illustrative purposes only and should not be considered as a recommendation or investment advice to buy or sell. No investment decision should be made solely based on this information. Impax Asset Management or BNP Paribas Asset Management may or may not hold positions in the companies named.
[1] Europe’s state of water 2024: the need for improved water resilience, October 2024
[2] Water Europe, Investing in Water, October 2024
[3] European Commission, 2022
[4] https://www.fi-compass.eu/sites/default/files/publications/FinancingGapAgricultureAgrifood_RTW_0.pdf
[5] Valmont Sustainability Report, 2024
