Best Water ETFs for Q2 2022

CGW, EBLU, and FIW are the top-performing water exchange-traded funds

Water is one of the planet’s most coveted and widely used resources. Like other commodities, such as oil and gold, water assets can add significant diversification to any portfolio.

One way to gain exposure to the water industry is through a water exchange-traded fund (ETF). These ETFs invest in companies involved in the treatment and purification of water, as well as its distribution. Some notable names include Germany-based BASF SE (BAS.DE), 3M Co. (MMM), and ITT Inc. (ITT).

As an essential commodity, water ETFs are often used as a defensive position in a portfolio. However, to the extent that water scarcity becomes a growing threat, these ETFs could be a significant offensive play as well. In addition, the industry will benefit from the $1.2 trillion U.S infrastructure bill passed by Congress in November 2021 and signed by President Biden (see more below).

Compared to other types of ETFs, the water ETF universe is small, composed of five funds that trade in the United States, excluding inverse and leveraged ETFs, as well as ETFs with fewer than $50 million in assets. These ETFs do not invest in water as a commodity or in water rights. Instead, they focus on water resources companies. Water ETFs have underperformed the S&P 500, which posted a one-year trailing total return of 15.2% as of Feb. 15, 2022. The best-performing water ETF based on performance over the past year is the Invesco S&P Global Water Index ETF (CGW).

We examine the best three water ETFs below. All numbers below are as of Feb. 15, 2022.

Key Takeaways

  • Water exchange-traded funds (ETFs) have underperformed the broader market in the past year.
  • The water ETFs with the best one-year trailing total returns are CGW, EBLU, and FIW.
  • The top holdings of these ETFs are American Water Works Co. Inc., Ferguson Plc, and AECOM, respectively.

Invesco S&P Global Water Index ETF (CGW)

  • One-Year Trailing Total Returns: 9.2%
  • Expense Ratio: 0.57%
  • Annual Dividend Yield: 1.10%
  • Three-Month Average Daily Volume: 96,889
  • Assets Under Management: $1.1 billion
  • Inception Date: May 14, 2007
  • Issuing Company: Invesco

CGW is a multi-cap blended fund that tracks the S&P Global Water Index. The index is composed of a portfolio of companies from developed markets representing water utilities, infrastructure, equipment, instruments, and materials. More than 94% of CGW’s portfolio is allocated to industrial and utilities companies. CGW’s top holdings include American Water Works Co. Inc. (AWK), a water public utility company; Xylem Inc. (XYL), a water technology provider to residential, commercial, industrial, and agricultural clients; and Veolia Environnement SA (VIE:PAR), a French water management, waste management, and energy services company.

The $1.2 trillion Infrastructure Investment and Jobs Act, signed into law by President Biden on Nov. 15, 2021, marks the largest investment in clean drinking water and wastewater infrastructure in American history. It includes $55 billion in dedicated funding to replace all of the nation’s lead pipes and service lines and clean up dangerous chemicals.

Ecofin Global Water ESG Fund (EBLU)

  • One-Year Trailing Total Returns: 7.3%
  • Expense Ratio: 0.40%
  • Annual Dividend Yield: 1.00%
  • Three-Month Average Daily Volume: 8,783
  • Assets Under Management: $57.8 million
  • Inception Date: Feb. 15, 2017
  • Issuing Company: Tortoise

EBLU is a multi-cap, blended fund that targets the Ecofin Global Water ESG Net Total Return Index. The index is comprised of global companies positioned to benefit from the pursuit of solving the water supply/demand imbalance. At least 80% of the market cap of the index must meet a designated minimum ESG score. To be in the index, companies must derive at least 50% of their revenues from water industry-related activities or get 40% of the revenues from the water industry. They also must meet certain liquidity and market capitalization thresholds. The top holdings of EBLU include Ferguson Plc (FERG:LON), a British-American plumbing and heating products distributor; American Water Works Company; and Veolia Environnement.

First Trust Water ETF (FIW)

  • One-Year Trailing Total Returns: 6.7%
  • Expense Ratio: 0.54%
  • Annual Dividend Yield: 0.39%
  • Three-Month Average Daily Volume: 97,905
  • Assets Under Management: $1.4 billion
  • Inception Date: May 8, 2007
  • Issuing Company: First Trust

FIW is a multi-cap ETF that invests in a blend of value and growth stocks. It tracks the ISE Clean Edge Water Index. The index is composed of exchange-listed companies deriving a substantial portion of their revenue from the potable and wastewater industry. They are selected according to market capitalization, liquidity, and other requirements. More than 90% of the portfolio is allocated three sectors: industrials, utilities, and healthcare. FIW’s top three holdings are AECOM (ACM), an infrastructure consulting firm; Tetra Tech Inc. (TTEK), a consulting and engineering services firm serving the water industry; and Advanced Drainage Systems Inc. (WMS), a maker of pipes, tanks, and other drainage and water industry equipment.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  1. Yahoo! Finance. “SPDR S&P 500 ETF Trust (SPY).” Accessed Feb. 16, 2022.

  2. ETF Database. “ETF Screener.” Accessed Feb. 16, 2022.

  3. ETF Database. “CGW: Invesco S&P Global Water Index ETF.” Accessed Feb. 16, 2022.

  4. Invesco. “CGW: Invesco S&P Global Water Index ETF.” Accessed Feb. 16, 2022.

  5. The White House. “UPDATED FACT SHEET: Bipartisan Infrastructure Investment and Jobs Act.” Accessed Feb. 16, 2022.

  6. ETF Database. "Ecofin Global Water ESG Fund." Accessed Feb. 16, 2022.

  7. Ecofin. "Ecofin Global Water ESG Fund." Accessed Feb. 16, 2022.

  8. ETF Database. “FIW: First Trust Water ETF.” Accessed Feb. 16, 2022.

  9. First Trust. “First Trust Water ETF (FIW).” Accessed Feb. 16, 2022.

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