For years, water, understandably, sat behind carbon in the sustainability conversation. This, however, bred a complacency that water risk was local, slow moving and easily managed. Today, water is showing up where investors care most, from operating costs and capex intensity to licence to operate.
The scale of inefficiency is often underappreciated. Globally, more than 8.5 trillion litres of water are lost annually through leakage according to some estimates, enough to meet the needs of every person on earth for 22 days. Water risk is presenting itself in foregone revenue, higher input costs and as a signal that systems are running closer to the edge than many balance sheets imply.
This is why water is such an important theme within our sustainable investment funds, and where engagement can be particularly effective. We focus on how companies measure, reduce and price water risk, how resilient they are as demand continues to rise and where technology can be deployed to scale solutions.
Many see water loss as a measurement problem before it becomes a spending problem. That typically means more granular monitoring, faster detection and clearer accountability.
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From the companies we invest in, Watts Water is a strong example of this discipline in practice. It reports a 62% reduction in operational water intensity since 2018 and has since reset its baseline to 2023, targeting a further 3% annual reduction. That progression matters for investors because the easy wins have largely been captured, and the next phase requires more operationally complex change rather than simple efficiency upgrades.
Utilities approach the issue through a different lens, but the economics are similar. American Water, for example, is using digital meters and advanced leak detection to address non-revenue water, linked to a target to cut overall water use by 15%. Programmes like this can look incremental quarter by quarter, but over time they compound into a material cost win.
Efficiency helps, but it does not remove the need for long life infrastructure in a world where drought and flooding risks are rising at the same time. From an investment perspective, this is where water starts to look less like a sustainability theme and more like essential infrastructure with an extended reinvestment cycle.
American Water’s stated $40–42bn long-term infrastructure plan over the next decade, spanning flood defences, reservoirs and desalination, highlights both the scale and the duration of that challenge. For investors, long duration, socially essential capex tends to deliver steadier returns, albeit with greater execution risk.
We see this clearly in the UK. Veolia has highlighted that seven regions in England could face severe water stress by 2030. Whether or not every assumption in that projection plays out, it reinforces the broader point that water stress is no longer a distant or emerging market issue.
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The most attractive businesses within the water theme are using these pressures to their advantage, creating customer value and more efficient organisations.
Xylem illustrates how scalable that approach can be. Since 2019, it has helped reduce over 3.5 billion cubic metres of non‑revenue water through smart metering, leak detection and pressure management. Veolia is deploying automated meter readers to give clients real‑time visibility of flow and leaks, enabling reuse while minimising discharge.
This is where water becomes commercially compelling. As standards rise, demand strengthens for solutions that convert compliance into operational advantage. That dynamic is most visible in water quality, where PFAS (polyfluoroalkyl substances) are becoming a regulatory and reputational flashpoint. Veolia has processed over 90 billion litres of contaminated water using advanced, molecule‑specific technology.
Water has therefore moved beyond being a distant environmental issue to one of the defining sustainability concerns of the 21st century. Our engagement shows companies are taking water risk seriously, not relying on slogans, and for investors that creates long term, structural opportunities in a theme that is now being addressed with greater urgency and discipline.