The U.N.’s World Water Day, marked each March 22 for nearly 30 years, looked past at-risk oceans and lakes this year to the water deep under our feet and often pumped into our houses.
Groundwater, essentially invisible but with an impact that’s “visible everywhere,” is the U.N.’s particular area of concern, it said.
“In the driest parts of the world, groundwater may be the only water people have,” the global organization says on its site.
By definition, groundwater is the water beneath Earth’s surface in rock and soil pore spaces and in the fractures of rock formations. About 30% of all readily available freshwater in the world is groundwater, supporting drinking supplies, sanitation systems, farming, industry and natural ecosystems.
In many places, human activities overuse and pollute groundwater. In other places, officials simply do not know how much water is underground. Groundwater will play a critical role in adapting to climate change as rising temperatures put ever-greater strain on water needs, the U.N. says.
In the U.S. alone, fixing the water infrastructure — including ridding groundwater of what are usually known as “forever chemicals” — featured only behind transportation as the largest recipients of funding in last year’s $1.2 trillion infrastructure law. The bipartisan effort included $550 billion in total new spending, of which more than $55 billion is committed for the modernization of water infrastructure.
Much of the nation’s water infrastructure was built decades ago. Leaking water has become an issue, with some water systems reporting loss rates exceeding 60%, a McKinsey & Co. report on the sector says. The infrastructure act provides funding to replace lead pipes throughout the country, address emerging contaminants, especially in small and disadvantaged communities, and the spending will support rural water projects.
This renewed attention on groundwater and water-system basics — some would argue long-neglected issues nearing crisis — present investing opportunities.
Peter Klein, chief investment officer and founder of ALINE Wealth, with a dedicated focus on water investing, talked about the Western U.S. megadrought and rethinking how little we “charge” for water in a Barron’s Live With MarketWatch conversation last year. Listen to that interview.
MarketWatch checked back in with Klein on World Water Day to refocus on the groundwater theme, and the investment opportunities that water filtration and water management stocks may present.
MarketWatch: Why groundwater?
Klein: U.S. groundwater had been subjected to emerging contaminants with little to no EPA action for 30 years. Remediation is huge. Some of the infrastructure spending will move this along.
The particular chemicals, “forever chemicals” as they’re called, are per- and polyfluoroalkyl substances, or PFAS. It’s a byproduct in GORE-TEX®, for instance, the waterproofing treatment in clothing. (Editor’s note: GORE-TEX announced late last year its own efforts to reduce PFAS, including its first products using a PFAS-free waterproof membrane available for purchase in late 2022.)
Or maybe you’re familiar with nonstick pot and pan coating Teflon, another PFAS. PFAS pollute water, do not break down, and remain in the environment for decades. They can be detected in human bloodstreams and have been linked to some forms of cancer, according to some research.
The infrastructure plan calls for spending on reverse osmosis and filtering, and money to back an EPA mandate against companies creating such contaminants. (Here’s the Biden administration’s spending plan for the EPA on “forever chemicals.”)
It’s a positive for society and health. And a big benefit for companies in this space.
I mean John Oliver’s “Last Week Tonight” has dealt with it, so there you go.
(Editor’s note: Klein’s compliance rules don’t allow him to name specific stock holdings under ALINE’s management. Some companies that work with reverse osmosis technology and filtering include Energy Recovery Inc.
Consolidated Water Co.
and LiqTech International
MarketWatch: No doubt, the infrastructure spending was a boon to publicly traded companies in this space, but is this a sector that will have to live and die with federal spending? Was there already impetus for change?
Klein: Well, water and wastewater got the most money, right after transportation. It’s significant. But we were already crossing the Rubicon on water. First of all, there’s the Environmental, Social and Governance (ESG) investing push driving demand for growth in these stocks and companies.
Second, there’s just underlying fundamental demand because water is something no living thing can be without. And there’s just, I don’t know if all of a sudden, but certainly a much clearer realization of the stress on this resource.
We really are at ground zero with the need to fix our water infrastructure. Climate change, and major rainfall deluges, which we’re already seeing, create new stress on our storm water systems. We need to address nitrogen runoff from lawns and agriculture, especially after storms. Evidence of increased flooding calls for revamped storm runoff systems on city streets.
(Editor’s note: The two largest water-focused exchange-traded funds are First Trust Water
and Invesco Water Resources
Another offering, the L&G Clean Water UCITS ETF
offers exposure to European water ideas. It tracking the Solactive Clean Water index and is exposed to companies actively engaged in the global clean water industry with technological, digital, engineering or utility services. Other stock and ETF ideas around water treatment and management were shared in this column by MarketWatch’s Debbie Carlson: Water is plentiful, but ways to invest are scarce — here’s how to make money)
MarketWatch: What else do investors need to think about right now when it comes to water?
Klein: Just remember there’s been decades of underinvestment. And that fact runs up against a greater environmental awareness, a green movement, a concern for scarcity. That means water metering and related companies will matter.
We really have water interests aligned right now.