Hedge funds buy up water rights to profit off droughts
Trends
February 2, 2023
Investors love scarcity. The fewer there are, the more valuable it becomes.
Why were monkey JPEGs so valuable? 🤲 Scarcity.
In that case, maybe we should take something else a bit more seriously: water.
With only 3% of the world’s supply being fresh water — and the fact that we literally need it to survive, we’d say it’s more important than oil and NFTs.
Quick geography lesson: In the Western US, the Colorado River’s water is important for nearby cities, including Denver, LA and Salt Lake City. These rivers rely on mountain snow to flow down but…
- The West is getting less snow, and the seasons are shorter.
- Water flow has dried up nearly 20% in the past century.
- A 23-year megadrought has made matters even worse.
“Proof that hedge funds can’t profit off everything.”
In 2017, New York-based Water Asset Management started buying up farms in Colorado’s Grand Valley.
- No, they don’t have a newfound love for the simple things in life.
- It’s about the water rights that come with the farms.
Not everyone’s happy (and why would they be). The Colorado River Water Conservation District General Manager sees “these drought profiteers as vultures.”
There’s a more conflict-free way to invest in water…
The Invesco Water Resources ETF (NASDAQ:PHO) holds companies “that create products designed to conserve and purify water for homes, businesses and industries.”
For example, American Water Works (NYSE:AWK) is one of the fund’s top holdings. They’re a public utilities company that provides water and wastewater services.
In 2021, a trillion-dollar infrastructure bill was signed, which would allocate $55B into modernizing water infrastructure.
But even more investment may be needed…
- 16% of the US’ water pipes are at or beyond their useful life (75-100 years).
- It’s estimated that by 2030, half the US freshwater basins will fail to meet monthly water demand.
Bring your bottles out. It’s time to start hoarding some water.
