Water Scarcity Solutions

This basket targets solutions to global water scarcity, where nearly 4 billion people face severe shortages for at least one month annually and demand is projected to rise 55% by 2050 amid fixed or declining freshwater supplies. The 20-name portfolio, with an effective N of 18.6, spans water infrastructure, treatment technologies, desalination efficiency, and precision agriculture across industrial, utilities, and agricultural sectors. The investment logic centers on companies providing essential tools to enhance water access, reuse, and efficiency—such as energy recovery devices that cut desalination energy use by up to 60%, advanced pumps and smart metering for infrastructure modernization, and automated irrigation systems that conserve billions of gallons while boosting crop yields. With smart water management markets expanding at CAGRs of 11-14% through the early 2030s and annual global losses of 324 billion cubic meters of freshwater equivalent to supplying 280 million people, these holdings address structural supply-demand imbalances driven by population growth, urbanization, and climate pressures.

Key risks include regulatory shifts around water pricing and allocation that could alter project economics, heightened competition in desalination and treatment segments, and execution challenges from long sales cycles in megaprojects or weather-dependent agricultural demand. Physical climate impacts, such as prolonged droughts or policy-induced water restrictions, may also disrupt end-market spending. The highest-conviction position is ERII at 7.8% weight with an 83 exposure score, as its pressure exchanger technology delivers proven energy savings of billions of dollars annually in seawater reverse osmosis plants, directly enabling scalable, lower-cost freshwater production in arid regions where desalination is expanding rapidly to combat scarcity.