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Water is a precious resource that no one can live without. Yet, access to safe, clean water has reached crisis levels in many parts of the world. Today, nearly two billion people lack access to safely managed drinking water,1 and by 2030 roughly 700 million people stand to be displaced by intense water scarcity.2

 

 

Despite these dire statistics, increased spending on infrastructural and technological solutions has helped water emerge as a compelling investment theme.

“The increasing demand for water has instigated a wave of environmental regulations,” explains Terrence Demorest, Westmount’s Chief Investment Officer for public markets. “And since water impacts nearly every environmental issue, we can easily make room for water investments in our ESG portfolio—not only as a diversifier but as an alpha generator. This is an opportunity to invest in companies that do good in the world.”

To obtain exposure to responsible water companies, Westmount has curated relationships with mutual funds specializing in this niche space. In some cases, the portfolio managers in charge started out in scientific fields before pivoting to the investment world. This gives the funds a leg up in sourcing water companies that align with communities, farmers, and utilities, in a broad effort to mitigate climate risks. Besides improving quality of life for ordinary citizens, this investment strategy also contributes to reduced energy consumption, elevated crop yields, lower deforestation rates, and more efficient crisis relief efforts.

 

A Global Concern

Investments in sustainable companies are only viable if they generate profits. That’s why activist water companies tend to have an emerging markets tilt, where the need for solutions looms strongest. Europe is likewise a hotbed for companies excelling in the renewable energy space.

The water scarcity issue isn’t just an overseas challenge, as has been observed in American cities like Flint, MI, Jackson, MS, and Lake Mead. In Los Angeles, too, residents regularly grapple with seasonal droughts, historically low reservoir levels, and numerous restricted water use mandates.

“This makes investors extra mindful of how this issue more profoundly impacts people on a global basis. By pairing water with clean technology and renewable investments, we strive to honor their personal values while yielding returns that meet market expectations,” notes Demorest. “I suspect this will be a profitable space for a long time since water scarcity isn’t going away any time soon.”

Have a question about our ESG offering or investment platform? Call us at 310-556-2502 or email info@westmount.com to speak with an advisor today.

Sources
1SDGS Report 2021
2UNICEF | Water Scarcity
3,4Sustainable Development Goals | Goal 6
5Chapter 3 | Freshwater Resources
5UNICEF | Water, Sanitation, and Hygiene (WASH)

Disclosures
This report was prepared by Westmount Asset Management, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission. The information contained in this report was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions and Westmount’s opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this report may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Westmount’s prior written consent. If you have any comments or questions about this report, please contact us at info@westmount.com.