11 Best Water Stocks To Buy
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In this article, we discuss 11 best water stocks to buy. If you want to skip our discussion on the water industry, head directly to 5 Best Water Stocks To Buy.
2023 has been riddled by volatility due to political, economic, and environmental factors that have had a cascading effect on the water sector, impacting M&A activities and deal flow. Concerns about a potential recession, the ongoing crisis in Ukraine, and record-breaking global temperatures have all impacted water assets. Despite these challenges, the underlying fundamentals of the water industry continue to attract a diverse range of investors, including private equity funds and well-established industrial manufacturing companies. While the cost of capital has increased, there is an influx of infrastructure funding from the U.S. and EU into municipal markets, as per a report by Bluefield Research. The competition for deal origination is intensifying, and there is a constant need to adapt portfolios for growth in this dynamic environment.
Due to climate change, a growing global population, and technological advancements, water management is evolving swiftly. According to WaterColor Management Insurance & Risk Management, the water treatment industry is witnessing significant trends that will reshape its landscape in 2024. Firstly, the adoption of digitalization is revolutionizing water management, ensuring improved quality and quantity control with the support of technologies like 5G, blockchain, and cloud solutions. Secondly, wastewater processing is evolving through advanced oxidation processes, adsorption/biosorption, and biological remedies to reduce pollutants. Advanced filtration, driven by nanotechnology, is allowing the development of membranes that efficiently remove micropollutants, while biological filtration is gaining recognition as well. Moreover, flood prevention is advancing with improved designs, monitoring, forecasting, and catastrophe modeling. Water-saving technologies, including water reuse, recycling, and intelligent irrigation, are gaining momentum. Decentralized infrastructure is becoming popular for enhancing community resilience, with modular and mobile treatment systems providing alternatives to centralized systems. Furthermore, material science is contributing innovative materials to enhance water management efficiency. Lastly, desalination is evolving with a focus on cost reduction and environmental impact mitigation, utilizing renewable energy and biomimicry for salt extraction from seawater.
Deloitte observed that electric power companies are increasingly recognizing and disclosing water risk in their financial reports, highlighting potential challenges such as reduced generation and negative business impacts due to factors like inadequate precipitation, drought, and regulatory actions limiting water supplies. The rising water stress has led to increased water costs, particularly evident in nuclear power plants where average water and coolant expenses rose from US$138 to US$140 per megawatt between 2021 and 2022. Thermal power plants, relying on water for cooling, face efficiency issues and environmental regulations restricting water discharge. Western hydroelectric plants may be at risk of shutdown due to low water levels, but overall, the US power production has become less water-intensive over the years. The growth of wind and solar photovoltaic generation is expected to contribute to this trend as they don't rely on cooling water. However, the emerging trend of using electrolysis for green hydrogen production could potentially raise water consumption. To address water sustainability, power plants are exploring alternatives such as using brackish water, greywater, or recycled water for cooling instead of freshwater.