Drinkable water is a scarce natural resource, just like oil and gas are. As the world’s population grows, the water supply may become the most precious natural resource. By 2030 over half the world’s population could be living in areas where water is running short. This results from a number of factors, including increased demand for meat, dairy products and biofuel. The demand for water from the global agricultural sector is expected to increase by between 70% and 90% by 2050.
Conservation of the world’s water resources is commonly seen as one of the most important challenges for sustainable business. Companies in many different areas of business try to reduce the amount of freshwater needed for the production process in order to transform the business to a sustainable model.
Hence it is not surprising that more and more investors are investing companies engaged in creating potable water for consumers orirrigation supplies for farming. As drinking water and irrigation for farming are of uttermost importance for the whole global population, these companies should be excellent investments in the long run.
As with any other business, the financial sector has launched several interesting exchange traded funds (ETF) for investors interested in the water sector.
PowerShares Global Water Portfolio (NYSE:PIO) is an ETF that seeks to replicate the performance of the Palisades Global Water Index. The portfolio is rebalanced quarterly. The expense ratio of the ETF is 0.75 %.
The ETF is rather international in its holdings: the top country allocations are USA (30.66%), Japan (13.12%), France (9.90%), Finland (8.92%) and United Kingdom (7.64%). The top five holdings are Kemira Oyj (5.90%), ARCADIS N.V (5.36%), Nalco Holding Co. (5.21%), Hyflux Ltd. (5.17%) and Organo Corp. (5.16 %).
PowerShares Water Resources Portfolio (NYSE:PHO) seeks to replicate the performance of the Palisades Water Index that includes companies that focus on the provision of potable water, the treatment of water, and techology and services directly related to water consumption. The portfolio is rebalanced quarterly and the expense net ratio is 0.66 %.
The top ETF holdings are AECOM Technology Corp. (5.34%), URS Corp. (5.00%), Veolia Environnement (ADS) (4.96%), Tetra Tech Inc. (4.93%), and Valmont Industries Inc. (4.89%). I was not able to find information about the country allocations in the official information given about the ETF in the web site of Invesco PowerShares.
Claymore S&P Global Water ETF (NYSE:CGW) is another low-cost passive index fund. The Claymore S&P Global Water Index Fund seeks results that correspond to the S&P Global Water Index. The index includes about 50 equity securities selected from global developed market exchanges. The companies are associated with demand of water, water utilities, infrastructure, equipment, instruments and materials. The expense ratio of the ETF is 0.65%.
The Claymore S&P Global Water ETF is more US centric than the PowerShares Global Water Portfolio. Top country allocations are USA (40.79%), UK (18.63%), France (14.13%), Switzerland (9.12%) and Japan (5.75%). The top fund holdings are Veolia Environnement (9.49%), Kurita Water Industries (7.22%), United Utilities GRP PLC (6.95%), Nalco Holding (5.65%) and Severn Trent PLC (5.49%).
Finally, First Trust ISE Water Index Fund (NYSE:FIW) is an exchange traded fund that seeks results corresponding to the performance of ISE Water Index. The index includes top 36 stocks in the industry and the portfolio is balanced twice every year. The gross expense ratio of the ETF is 0.77% and net expense ratio 0.60%.
The top holdings in the First Trust ISE Water Index Fund are Millipore Corporation (4.28%), Aecom Technology Corp. (4.24%), American Water Works Company, Inc. (4.19%), Nalco Holding Co. (4.17%) and Pall Corporation (4.07%).
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