We believe the world is at a tipping point when it comes to water scarcity. According to a recent report, some 2.2 billion people do not nave access to clean drinking water.1 Two-thirds of the world's population faces severe water scarcity and currently lives without sufficient access to fresh water for at least one month of each year. The World Economic Forum says that 1.8 million children die from either lack of water or from diseases contracted from tainted drinking water every single year. For perspective, that's equal to the total number of elementary school children in the state of Florida.
And things don't seem set to improve any time soon. According to the United Nations, the world's population is expected to increase from 7.7 billion today to almost 10 billion by 2050. That's going to put an enormous strain on an already fragile supply/demand imbalance. Water on Earth is finite, and there is no such thing as "new water."
3 Key factors lie at the heart of these problems: insufficient infrastructure; booming populations and economic growth; and climate change, which is adding stress to an already fragile system. Because of these challenges, we're seeing a rise in requests for help from governments around the world. Given the combination of public budgets under pressure and the urgent need to address the health and safety of global populations, that help is likely to come from the private sector.
In our view, the conditions we've outlined make the water industry ripe for change. We've seen estimates that the industry will grow 4% to 6% per year for a long time, and we think companies able to innovate and deliver new science, technology, and intelligence-enabled solutions will grow at even faster rates. For example, some companies in the industrials sector offer products and services such as digitized water metering, automation for water treatment and distribution systems, and specific water-software platforms that provide water intelligence that can help with regulatory compliance, cost savings, remote operations, data management, process optimization, and equipment maintenance. The software also gives customers greater confidence in systematic measurements via predictive diagnostics and maintenance alerts. Innovations such as these should go a long way toward solving water problems for much of the world.
Given the considerable catch-up work that needs to be done, we anticipate attractive investment opportunities in this area for decades to come. Indeed, water equities have shown strong performance relative to broad US and global equity benchmarks since 2001.
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