Investing in water: why water is blue gold

The bad news is that global water shortages can only get worse. The good news is that by investing in the right firms, you can cash in on rising demand. Tim Bennett reveals eight ways to surf this wave of profits.

Anyone unfortunate enough to have been caught by this year's record-breaking UK floods might wonder how a lack of water could possibly be an imminent global problem. But away from our damp corner of the planet, things are rather different. Since 1950, the world's population has doubled but the amount of fresh water available hasn't actually budged at all. The result? According to the International Water Management Institute (IWMI), one-third of the world's population is short of water. What's worse, this is a point that the planet was not expected to reach, according to previous reports, until 2025, implying that the situation is deteriorating fast. This, says the FT, is a "crisis". Others use stronger language. In 1995 the vice-president of the World Bank said that "the wars of the next century will be about water". While there hasn't been a water war to date, tensions are mounting just last month Egypt had to deal with what the Israel News described as another "water uprising" caused by sharp price rises; while the King of Jordan has warned that water was the only issue over which his country would commit to war.

Politicians around the world are gradually waking up to this reality, as the $20bn water projects bill passed this week in the US shows, but even this latest legislation only tackles domestic issues and does nothing to solve the trouble brewing in the Middle East and vital emerging markets, such as India and China. The fact is that the ever-worsening imbalance between supply and demand for what Maude Barlow, chairman of the Council of Canadians, has described as "blue gold" will need to be dealt with. And that creates some great investment opportunities.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.