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Safeguarding water resources is essential not only for life, but for economic security, societal well-being, and ecological stability. Industry and governments are responding to growing water insecurity with innovative solutions.
Humans need fresh water to live, but it's becoming steadily harder to find. Rising global demand means that supplies are increasingly stressed, with accessible resources limited. Climate change is intensifying the risks, as droughts, erratic rainfall, and extreme weather become the norm. These disruptive events are aggravating risks for agriculture, food security, infrastructure, and economies.
"Water, water everywhere, nor any drop to drink." When poet Samuel Taylor Coleridge wrote those words in "The Rime of the Ancient Mariner", he was describing the plight of a thirsty sailor mid-ocean, surrounded by salt water but without any fresh water to drink.
Water shortages drive up prices, disrupt industries, and deepen inequality.
As Benjamin Franklin famously noted, "When the well's dry, we know the worth of water." Water stress, defined as demand exceeding supply for at least one month a year, now affects half the world's population each year. According to UN Water, over 5 billion people will be affected by 2050.
Not everyone is equally affected; regional disparities remain stark. Areas like the Middle East and South Asia face chronic shortages, while other parts of the globe enjoy relative abundance. Climate change is exacerbating these differences, as both droughts and floods become more frequent.
The global economy is being recalibrated. What does this mean for investors? Find out in our investment outlook 2026.
The difficulties won't disappear anytime soon, but thanks to innovations introduced by businesses, and forward-thinking by governments, potential solutions are appearing. These efforts are borne of necessity, since water shortages drive up food and energy prices, disrupt manufacturing, and alter the economics of industries from semiconductors to mining.
Water recycling is a special focus for parts of the semiconductor industry. For example, Taiwanese semiconductor company TSMC targets 90 % water recycling at its Arizona site.
Mining for metals and minerals is often highly water intensive. This challenge is frequently compounded by the fact that a significant proportion of mining operations are located in regions already facing water scarcity or water stress. Companies are, however, beginning to respond. Miner Rio Tinto, for example, reports that at its Gobi Desert operation it has invested in both water recycling and desalination. As a result, the site now uses roughly half the water consumed by certain peers operating in comparable conditions.
Andrew Patrick is Team Head, Direct Portfolios at LGT Wealth Management in the UK, a role in which he is responsible for managing a range of directly invested equity and multi-asset funds and reference model portfolios. He has previously analysed companies in the energy, industrials, and basic materials sectors and has a keen interest in sustainable investing.
Since agriculture is responsible for the largest use of fresh water globally, it is a key target for innovative solutions. Digital sensors, smart metering, advanced filtration, and wastewater treatment technologies are being deployed worldwide to support more efficient water use.
Data centres in particular, and many manufacturing processes, are also significant users of water. Here new solutions like membrane-based desalination and closed-loop recycling are being used at certain facilities to reduce reliance on fresh-water.
While corporations are embedding water stewardship into strategic planning and reporting, regulators and governments are also responding. New policies and pricing mechanisms are increasing the visibility of water risk in countries, sectors, and supply chains. Governments are driving investment through regulation and infrastructure funding.
Achieving the United Nations Sustainable Development Goal (SDG) No. 6, i.e., clean water and sanitation, faces tough challenges, including pollution, ageing infrastructure, and insufficient investment. Infrastructure issues are a particularly big problem. Decades- or even century-old water pipes in developed markets frequently break or leak, causing enormous water loss and expense. Emerging markets face underdeveloped and overstretched supply networks. Pollution is exacerbating the challenge, as untreated wastewater and agricultural runoff contaminate existing supplies, increasing health and treatment costs.
While the size of the fresh-water problem can seem overwhelming, listed and unlisted markets including a growing range of companies and projects that offer technologies and services tailored to water efficiency, treatment and infrastructure.
