Investing in Thematic Funds: Focusing on Solving Water Scarcity
With World Water Day on March 22, water scarcity comes into focus. René Nicolodi states: Technologies for water protection, improving water quality, and efficient supply are relevant both from a sustainability and investment perspective.
Interview with Dr René Nicolodi
Martin Spieler: March 22 is UN World Water Day. The United Nations reminds us that water is the most important resource for all life on Earth. However, in many regions of the world, water is a rare and therefore precious commodity. But why are investors interested in the topic of water?
René Nicolodi: There is no alternative to water. Demand is high and is expected to increase due to population growth, higher living standards, and climate change. As a result, scarcity and supply bottlenecks are a huge problem. 2.2 billion people worldwide still do not have access to clean water. Accordingly, investments in supply, both from the public sector and private side, are a very important aspect.
Critics argue that water should be available to all people for free. Doesn't this argue against investing in water?
The argument has some merit, as water is a public good. However, one must keep in mind that even in water-rich Switzerland, water does not simply flow from the tap. It is cleaned, treated, and the maintenance of supply infrastructure is of great importance. This has its price. And the price of water has the effect of encouraging investment and promoting the economical use of this scarce resource.
How can one ensure that an investment in the water sector is truly sustainable and socially responsible?
By focusing on the core issues. These are scarcity, supply, and water quality. Therefore, technologies for water protection, improving quality, and efficient supply are relevant from both a sustainability and investment perspective. A producer of bottled water, on the other hand, is definitely not the focus of such an investment strategy.
Many companies claim to be sustainable. How do you identify companies that effectively make a positive contribution to the crucial resource of water?
One must ask two main questions. The first question is: what does the company produce, and how does this product or service contribute to solving the problem of water scarcity? And on the other hand: how does the company produce? Are sustainable production processes in place or not? Additionally, financial analysis questions arise. Is this a business model that can be successful in the long term? With this analysis, one can also find a good investment.
If we delve deeper into this aspect: which companies are in focus for you when investing in water?
These are usually specialized companies, often small to mid-cap companies. An example is Veralto from the USA, a company active in the field of cleaning and water protection. Or the American company Badger Meter, which is positioned in the field of water measurement technology, thus promoting efficiency and the economical use of the resource. In Switzerland, Geberit might come to mind, which is a world leader in the sanitary systems sector and makes a significant contribution to the efficient use of water.
Despite all sustainability, investors also want to see a return. How can the delicate balance between the desire for returns and sustainability be achieved in the water sector?
In our opinion, this can be achieved by focusing on areas that contribute to solving the water problem. These solutions should also generate higher growth in the long term. If one also identifies successful companies in this context, then there is an opportunity for a good return in the portfolio.
Conclusion: What to consider when investing in thematic funds and in the investment theme of water
- The demand for water is high and is expected to increase due to population growth, higher living standards, and climate change.
- Water scarcity, water supply, and water quality are core issues. Accordingly, technological solutions for water protection, improving quality, and efficient supply are relevant from both a sustainability and investment perspective.
- These solutions should also generate higher growth in the long term.
This interview was first broadcast in a slightly modified form on the show "Geld" on March 21, 2025, on Tele 1, Tele M1, and TVO.
The fund on the investment theme of water
The fund on the investment theme of water
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