Since the 1950s, the planet's population as nearly doubled. However, water consumption and usage has nearly tripled. The globe is facing a paramount dilemma; providing enough water for is growing population. Water is essential to human survival. While we can find substitutes for our oil addiction, finding a water substitute is impossible. Analyst's estimate that demands for clean potable water will grow about 6% annually.
IN PICTURES: 20 Tools For Building Up Your Portfolio

Emerging Markets Leading Usage
The World Bank reports that 80 countries now have water shortages that threaten the health of their citizens and economies. Most of these pressures are being felt by emerging market nations. More than half of China's largest 660 cities continually face water shortages. The nation currently boast 20% of the planet's people, but only commands 7% of the water reserves. 90% of those reserves in its cities' groundwater and 75% of its rivers and lakes are heavily polluted. Analysts estimate that, by 2030, China will face a water deficit of nearly 201 billion cubic feet. Similarly, many other nations on the Asian continent face comparable threats. Singapore needs to import nearly all of its water needs from neighboring Malaysia. In India, where agriculture accounts for 80% of the fresh water use, nearly 1.2 billion people will exhaust their water supplies by 2050.

Moving throughout the developing world, the tales are the same. In Latin America, less than 20% of the populations have access to adequate sanitation systems. Mexico City with its 23 million residents has outgrown its current water and sanitation system. In Honduras, many people are forced to travel numerous miles to for pay for a day's supply of clean water.

Worthy of Investment
Water scarcity with relation to emerging market population growth is one of the preeminent problems facing our planet. Access to clean water for health and food production remains one of the better long term investment themes. Companies that develop sanitation systems, filters and water infrastructure should continue to prove themselves through the upcoming years. Investors with timelines long enough should allocate some capital towards the sector. Both the Claymore S&P Global Water (NYSE:CGW) and PowerShares Global Water (NYSE:PIO) include holdings in developing markets and could be used as a starting point for investment. However, many of the brightest opportunities may be in individual equities.

China is going to great lengths to secure the natural resources it needs for its people, whether that be copper, oil or water. These include a recent plan to divert the Yangtze River to the Yellow and Hai Rivers to provide water for Beijing and the rest of the North. Two Chinese-based water companies that have been seeing their fortunes rise as the tide are Tri-Tech (Nasdaq:TRIT) and Duoyuan Global Water (NYSE:DGW). Tri-tech provides software and hardware to monitor and control municipal and natural water systems. Duoyuan provides pollution control and waste water treatment systems. Both have recently reported good earnings and should continue to grow as China addresses its water needs.

Carbon filters are some of the most effective methods at removing chlorine, sediment and other volatile organic compounds from water. Calgon Carbon Corporation (NYSE:CCC) is one of the largest manufacturers of activated carbon and filtration systems in the world. The company currently has a market share between 25 to 33% in UV-treated drinking water in China.

Finally, Veolia Environment (NYSE:VE) is quickly becoming the giant in the water sector. The company provides waste water and desalination operations in more than 66 countries including emerging market hotspots in the Middle East, Asia and Eastern Europe. Shares of the company currently yield an impressive 5.20%.

The Bottom Line
Analysts estimate that only Canada currently has enough water resources to sustain itself for the next 200 years. Water scarcity and increasing demand caused by population growth is one of the most compelling long-term portfolio themes. Significant investment will be needed by nations in order to keep their citizens healthy and fed. The proceeding water ETFs and stocks such as pump maker Flowserve (NYSE:FLS) are just the tip of the iceberg, with regards to this sector. Investors would be wise to allocate some funds to water investment. (To learn more, see Water: The Ultimate Commodity.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: United States Brent Oil Fund

    Learn more about the United States Brent Oil exchange-traded fund, the characteristics of the fund and the suitability and recommendations of it.
  2. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Bloomberg Crude Oil

    Find out more about the ProShares Ultra Bloomberg Crude Oil ETF, the characteristics of UCO and the suitability and recommendations of UCO for investors.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Growth

    Take a close look at the Vanguard Small-Cap Growth ETF, which focuses on domestic small-cap equities with a fundamental growth strategy.
  5. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
  7. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
  8. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  9. Mutual Funds & ETFs

    7 Best ETF Trading Strategies for Beginners

    Exchange-traded funds are ideal instruments for beginning traders and investors. Learn the seven best strategies for trading ETFs.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
  1. How should you plan for scarcity when investing?

    As resources become scarce in the world, investors use strategies to capitalize. Actively watching and profiting from the ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!