The consequences of climate change and the ever-growing global population are exacerbating the problem of water supply. Water is becoming increasingly scarce and has now also become interesting for investors. In this article, you can find out what opportunities there are for investing in water and whether a water ETF is worthwhile.

In brief:

Water is a limited resource
Due to population growth and climate change, demand for clean drinking water is expected to rise significantly in the future.
Water exchange-traded funds invest in product manufacturing, services, supply networks and energy sources related to this topic.
Several exchange-traded funds enable you to benefit from the performance.

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Costs

Interest

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Contents Hide

1 Background information on investing in water

2 The most important water ETFs

3 Conclusion: Water ETFs as an interesting investment opportunity

Background information on investing in water

It is humanity’s most important resource. Water has now become a scarce commodity, partly due to climate change. Below, we have summarised some background information on the topic of ‘investing in water’.

Investing in exchange-traded funds

You may be wondering how you can earn money with shares without taking on too much risk. Exchange traded funds allow investors to invest in several shares at once. They are among the financial investments with high returns.

Exchange traded funds are index funds traded on the stock exchange and track the performance of the respective index as closely as possible. This allows you to achieve the average return of the respective index. Unlike actively managed funds, no attempt is made to generate excess returns. However, this also has an advantage: the costs are significantly lower.

This asset is particularly popular due to the opportunity it offers for diversification. With the help of an exchange-traded fund, you can invest in numerous companies and reduce your overall risk. The MSCI World Index, for example, invests in over 1,600 companies worldwide.

In contrast, an ETF Europe invests in the largest and most important companies from across Europe. This allows you to build a global portfolio. Exchange traded funds are possibly the best risk-free investment if you follow the basics of investing.

An exchange-traded fund for beginners is, for example, any fund based on the MSCI World Index. This asset class is easy to understand. You can invest small amounts, for example with the help of an automated savings plan. You can flexibly adapt this to your individual situation.

Attention!

This asset class is characterised by being a cost-effective form of asset. It is also a passive investment and is ideal for long-term wealth accumulation.

Invest in this resource?

For most Germans and people in other industrialised countries, water supply is something they take for granted: you simply turn on the tap to get drinking water or fill the bathtub. Demand is rising as living standards improve and the world’s population grows.

Climate change and its consequences are particularly problematic. Progressive desertification is exacerbating climatic conditions. Dry countries are experiencing drought, making it difficult to grow many types of food. In addition, the summer months are becoming hotter and water shortages are increasing.

In many African countries, drinking water sources are not secure. The supply is considered secure if all people in the area have access to it and the drinking water is free of chemical or biological contamination.

In 2010, the UN decided that the right to clean drinking water is a human right. Demand is huge and growing, partly due to climate change. Here are a few facts about the issues surrounding this resource:

The UN World Water Report from 2020 states that 2.2 billion people have no access to clean drinking water.
If the current figures are compared with data from the beginning of the 20th century, consumption has increased sixfold.
A large proportion of the wastewater is not treated, which represents an additional environmental burden.

It is not only increased demand that makes this resource an interesting investment opportunity. Start-ups are emerging that are designing new machines to make water supply and treatment more efficient. In addition, infrastructure needs to be improved in order to optimise countries with difficult supply conditions.

Good to know:

The global water market is estimated to be worth USD 375 billion and is growing by an estimated few per cent per year. Problems such as these make the liquid an interesting investment opportunity for investors, as demand is also expected to rise significantly in the future.

What is a water ETF?

The index is determined by the performance of the corresponding companies included in the asset class. If the index rises overall, the value of the exchange-traded fund also rises, and vice versa.

A water exchange-traded fund, for example, includes companies that transport and treat water or are working to make its use more efficient. These are grouped together in an index in which investors can invest quickly and easily.

water supply
Provision of infrastructure: water meters, pumps, sewerage system
Services provided by engineers, such as the construction of sewage treatment plants
Supply network and its management
Product manufacturing in relation to water treatment for desalination and water purification
Delivery and transport
Hydropower as an energy source

This asset class has the advantage of containing several companies, making it less risky than buying individual shares in the sector. In addition, research is significantly less time-consuming, as the securities are already available and you only need to select the appropriate exchange-traded funds for your portfolio.

Advantages and disadvantages of investing money

Your potential investment in the water sector comes with various disadvantages and opportunities. One notable disadvantage is the higher costs. The costs of global exchange-traded funds are usually less than 0.20 per cent TER. However, the fees for this investment are around 0.65 per cent.

Sustainability may also be important to you. Many of the companies included in water exchange-traded funds promote sustainability by, for example, developing efficient solutions and investing in hydropower as a renewable energy source.

Water exchange-traded funds are a specific area. Unlike global ETFs, these are designed for a specific sector and are less diversified. In such cases, you should ensure that you continue to diversify in other areas in order to reduce the overall risk of the portfolio.

Nevertheless, investing in this area also offers advantages and opportunities that could prove interesting for you as an investor:

There is high demand for this liquid. This demand is expected to continue to rise due to population growth, climate change and its consequences.
It is a limited resource.
Many companies are working on ways to reduce their water consumption and make it more efficient. This includes industry, but also agriculture.
Other companies enable this efficiency by working on innovative technology and new machinery.
In addition, exchange-traded funds offer the general advantages of any financial investment: this asset class is considered liquid, profitable, comparatively secure with sufficient diversification, transparent and easy to understand. An investment can be made as a one-off investment or a savings plan. The ability to invest small amounts makes exchange-traded funds a good option for beginners.

Attention!

Unfortunately, there are currently few methods available to measure the sustainable use of this resource. Fund companies are also unable to officially evaluate companies in relation to this criterion.

The most important water ETFs

You may be wondering what to invest in to make it really worthwhile. Water exchange-traded funds could be a good option for you, covering a wide range of companies in the water sector with the help of a passive, long-term asset class. There are not many ETFs in this sector at the moment, with five currently available:

iShares Global Water UCITS (IE00B1TXK627)

Lyxor MSCI Water ESG Filtered (DR) UCITS – Dist (FR0010527275)

Lyxor MSCI Water ESG Filtered (DR) UCITS (FR0010527275)
L&G Clean Water UCITS (IE00BK5BC891)

Global X Clean Water UCITS (IE000BWKUES1)

The growing importance of this commodity is also making it increasingly attractive to investors. The exchange-traded funds mentioned above can be analysed from various perspectives.

The Global X Clean Water was only launched in 2022 and delivered an impressive performance of 8.05 per cent. The Lyxor MSCI Water ESG Filtered (DR) UCITS is just as new and achieved a return of 7.33 per cent.

Attention!

You can find more detailed information to help you make an informed investment decision on the websites of the respective providers. It is not possible to say definitively which exchange-traded fund is more suitable. This depends on the investor’s goals and priorities.

Water ETFs – What you should pay attention to

Before deciding on a water exchange-traded fund, it is advisable to read up on the water market. This is advisable because these funds can cover very different areas.

Some companies manufacture water purification products, while others focus on new innovations or transport solutions. The companies that come into question are diverse and specialise in different areas.

In addition, you should find out which provider manages the respective index. This can affect how effectively the index is replicated. Not all providers are equally transparent about the structure of their indices. You should also take a look at liquidity.

Good to know:

If you are a beginner, it is advisable to first build a broadly diversified, global portfolio before investing in thematic asset classes.

Investing in water – increasing safety

With the help of diversification, you can reduce the risk of your own portfolio by investing in a variety of securities, whereas thematic exchange-traded funds only invest in a specific sector and are therefore more like a bet.

For example, if you only invest in this liquid commodity, you are taking a higher risk. Take a look at the composition of the investment that interests you in the water sector. Ideally, you should invest in different areas.

It is not advisable to invest the majority of your invested money in a specific asset class. They can be an interesting additional option if you already have a broadly diversified portfolio and are looking for an exchange-traded fund with high returns.

Conclusion: Water ETFs as an interesting investment opportunity

Due to population growth, climate change and rising living standards, water is considered an attractive investment opportunity. The demand for drinking water is increasing, and supply is very poor in some African countries. Forecasts predict a further increase in the future.

Exchange traded funds offer a good opportunity to invest in several companies in the water sector. This asset class is characterised by good returns and the opportunity to generate passive, long-term wealth. This way, you can benefit from the increasing demand.

There are not yet very many exchange-traded funds in this sector. Examples include iShares Global Water UCITS and Global X Clean Water UCITS. If you are interested in investing, it is advisable to take a close look at the composition and potential risk.

You should be aware that this is a thematic exchange-traded fund that is not broadly diversified. Investing in an exchange-traded fund of this type is a good idea if you already have a diversified portfolio. If you would like to build up such a portfolio, you can find out more here or learn about index funds vs. exchange-traded funds!

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FAQ – Frequently asked questions about water ETFs

What are water ETFs?

They function in the same way as other exchange-traded funds. They invest in the water sector and include various companies that are involved in areas such as water treatment or hydropower as an energy source.

Which is the best exchange-traded fund?

There is no blanket answer to this question; it depends on the investor’s priorities. Asset classes can be analysed according to performance, costs and stability. In 2022, for example, Lyxor MSCI’s exchange-traded fund delivered the best performance.

Which companies does this exchange-traded fund invest in?

They include companies in the fields of water supply, infrastructure, product manufacturing, delivery and transport, or hydropower as an energy source.

Who is a water exchange-traded fund suitable for?

The asset is suitable for investors who consider water to be an important issue and who want to support future developments and benefit from them. It should also be mentioned that this is a thematic investment and not a globally diversified exchange-traded fund.

Water ETFs – The best investment opportunities for 2026

Background information on investing in water

Investing in exchange-traded funds

Invest in this resource?

What is a water ETF?

Advantages and disadvantages of investing money

The most important water ETFs

Water ETFs – What you should pay attention to

Investing in water – increasing safety

Conclusion: Water ETFs as an interesting investment opportunity

FAQ – Frequently asked questions about water ETFs