How can you invest in water, and should you?

Water companies, the pinnacle of liquid investments, provide a number of advantages to investor portfolios

How can you make a water investment?

Investing in water might not be as popular as artificial intelligence (AI) themes.

However, water stocks can be a welcome addition to your portfolio and won't necessarily reduce your profits.

Water stocks could offer some diversification, protection, and unexpected growth potential during a volatile period for the stock market, whether you're wondering where to invest for 2026 or you're just annoyed that your water bill has increased.

Today, January 12, a large portion of Southeast England is experiencing water scarcity. Chaos has resulted from Storm Goretti's extreme weather and the water infrastructure's creaking.

Nothing about this combination is unexpected. In actuality, a number of long-term trends are coming together to demonstrate why water is the most valuable resource in the world.

According to Saurabh Sharma, fund manager of the Regnan Sustainable Water and Waste Fund, "there's no economy without water." "Waste management is essential to a sustainable economy. These are vital components of our everyday existence; if either of them fails, the economy as a whole implodes. The "

The World Wildlife Fund conducted the first-ever evaluation of the global water systems' economic worth in 2023, estimating it to be £58 trillion a year, or 60% of the world's GDP.

The vast majority of people on the planet are finding it more difficult to obtain water, according to Jasmine Savage, investment manager at Foresight Group. This holds true for both developed economies like the US and the UK and emerging markets.

According to Savage, "we're seeing this demand-supply mismatch growing by 2030; it's projected that global water demand will be outstripping available resources by about 40 percent."

Structural tailwinds of water.

Due in large part to its widespread use, a number of long-term trends are driving the investment case for water.

The head of Pictet Asset Management's thematic client portfolio management, sustainability, and research division, Marc-Olivier Buffle, examines long-term structural changes and megatrends that are unfolding over decades and feels that a number of them have an impact on the water investment thesis.

Urbanization is a significant one. About 30% of people on the planet lived in cities in the 1950s. By 2011, that number had surpassed 50%, and by 2050, it is predicted to reach 70%.

"Without adequate water networks and infrastructure, both for drinking water and waste management, it is impossible to construct an efficient city," says Buffle.

Buffle and his team also associate water with the megatrend of societies becoming more health-conscious.

Water that is totally free of bacteria, viruses, microorganisms, chemical compounds, micro-pollutants, and other contaminants is becoming more and more common. The "

On the pollution front, per- and polyfluoroalkyl substances (PFAS), also referred to as forever chemicals, are a prime example. These artificial substances, which are found in a wide variety of goods, such as waterproof jackets and nonstick cookware, have been demonstrated to have detrimental effects on health even at low concentrations, but they are building up in water systems.

More stringent regulations against PFAS are starting to be implemented by governments. Water suppliers may face difficulties as a result, but other businesses in the value chain that create systems to track and evaluate the concentrations of these chemicals in water systems will have opportunities.

The megatrend of climate change is another. Both too little water (droughts) and too much water (flooding) cause issues for water infrastructure firms.

According to Buffle, "the need to develop new infrastructure for the resilience of water systems has arisen because these extremes are increasing with climate change."

On December 21, 2025, the River Ouse is partially submerged by high water levels in York, England, United Kingdom.

In December 2025, Storm Bram caused high water levels along the River Ouse.

In a similar vein, Savage divides the water investment thesis into three main points: the widening gap between supply and demand, persistent underinvestment in water infrastructure, and environmental and pollution issues.

It is useful to classify the types of businesses that make up the investible universe of water companies in order to address these long-term drivers.

Investing at every stage of the water value chain.

Water investments differ from one another.

The water supply companies that the majority of us will be most familiar with on a daily basis are United Utilities (LON:UU) and Severn Trent (LON:SVT). ), and Pennon Group (LON:PNN) are utilities firms, and as such, they play a largely defensive role in portfolios. They produce predictable, compounding income and have consistent demand throughout cycles (no one reduces water use during a downturn).

Water utility companies are able to pay very stable dividends because of their regulation, which gives them good visibility into their earnings and capital expenditures in the medium term (three to five years ahead).

In the water investment landscape, the value chain is broader and more diverse. Manufacturers of water treatment systems, suppliers of equipment, water analytics firms that track water quality, and construction firms that construct reservoirs or water channels make up this group.

Xylem (NYSE:XYL), Thermo Fisher Scientific (NYSE:TMO), and Agilent (NYSE:A) are manufacturers of equipment. All three are engaged in the production of products for ultrapure water, PFAS monitoring and/or treatment, and numerous other aspects of water management.

Utility companies are the final market for water industrials. They can be more cyclical and more sensitive to the economy, but they also present investors with the possibility of quick growth. They are essentially the water investment picks and shovels stocks.

However, water industrials also gain somewhat from the general defensiveness of the theme, even though they have more room to grow than utilities companies.

"The industrial companies will also benefit from a fairly stable demand base if the utilities themselves have good visibility over their capital spend and their operational expenditure programs over a three to five year period," states Savage.

Shorter-duration water tailwinds.

There are some shorter-term trends that have affected the area, but the majority of water drivers are structural and long-term.

The need for ultrapure water is one of these. This is a crucial component in the production of semiconductors and other industrial processes.

Sharma states, "You need water that is clean of all impurities when you're making a small chip."

For instance, Organo (TSE:6368), a Japanese company, provides water to Taiwan Semiconductors (TSMC) operations. Because businesses like TSMC need a steady supply of very high-quality water and need Organo engineers on site to guarantee its delivery, Organo efficiently runs a service. Given the amount of profits available to semiconductor manufacturers, it's also a high-margin business.

Demand in this area of the water market is therefore being driven by increased spending on AI data centers, which are notoriously water-intensive.

How to make water investments.

A portfolio can be diversified by investing in water. The theme as a whole is less vulnerable to the economic fluctuations that affect other areas of the stock market because the majority of the demand drivers are long-term and structural.

However, because there are different kinds of water companies, it can provide both defensive and growth opportunities.

This dual aspect of water investing is captured by most water funds. Pictet Water employs a barbell strategy to provide both growth potential through the more industrial aspects of the water ecosystem and consistent, dependable returns through water utilities.

"It should allow you to have relatively good returns during good times, but also a bit of defensiveness if you have a crash or a period of economic instability," Buffle says.

As of November 28, 2025, utilities received about 18% of the Regnans Sustainable Water and Waste Fund, while industries received about 64%. The remaining portion of the fund is primarily made up of materials and consumer discretionary stocks.