My avocation is water and fish zealot but I have a day job in an entirely different field that gives me access to interesting research reports, including some that examine the intersection between important trends and investing themes.  A fascinating one on water came out yesterday from Merrill Lynch.  It’s 185 pages and not for broad public distribution, but I can share the summary highlights.  While the report is global in scope, there are themes that apply to residents of Central Oregon.  (BTW, this report is written in British, not American, and those are not spelling errors.)

Running out of freshwater by 2040?

Some 75% of our planet is covered with water, yet less than 1% is usable, and even this is depleting quickly. Water demand is up c.40% over the past 40 years and is estimated to go up another 25% by 2050, but supply has more than halved since 1970 (World Bank). As a result, around half of the world’s population already endures extremely high water stress at least one month of the year. And at the current rate, we could run out of freshwater as soon as 2040 (Aarhus University).

Demand up 40%…

Water demand already exceeds population growth by 1.7x. The world’s population is set to peak at c.10bn by 2050, while urbanisation is rising dramatically with 25% of the global population moving to cities, driving demand. Even GDP growth should translate to a 400% increase in water demand by 2050. This is an era of hyper consumption like fast fashion, food and technology, which boosts water use. It takes 3 weeks’ worth of showers to make one t-shirt and 3.5 months’ worth for a 1kg steak. Data centres are the 10th largest water consumer in the US, and ChatGPT “drinks” a litre every 40 commands.

…yet supply down 50%

At the same time, water supply in terms of quality and quantity is declining. Some 80% of global sewage is dumped into the sea without adequate treatment, microplastics have been found in 83% of tap water, and 57% of global freshwater aquifers are beyond tipping point. Poor infrastructure limits supply as globally 1/3 of all fresh water running through pipes is lost to leakage. Finally, the climate and water crises are intertwined – for every +1°C, there is a 20% drop in renewable water (UN).

c.1/3 of global GDP exposed, inequality, hydro-tensions

As water scarcity worsens, 31% of global GDP could be exposed by 2050, with a potential 6% decline in GDP and increases in health risks, migration and inequality. In fact, c.80% of all countries share freshwater resources with at least another country, while a vast majority of them have no operational arrangements. This combined with scarce supply could create more hydro-interactions.

We have US$200bn in solutions; all we need is 1% of GDP

Every dollar invested in water access and sanitation could generate c.US$7 in returns (World Bank). The good news is it would cost only 1% of GDP p.a. till 2030 to solve the global water crisis. US water infrastructure is c.50 years old, so infrastructure like utilities are the first line of defence. Water management and tech like smart meters, AI and smart irrigation could result in better water use. Treatment like desalination is key for securing supply and already accounts for 90% of drinking water in some countries.