With the combined effects of a growing population, industrialization and climate change, the social and economic impact of a water shortage is increasing. The supply is capped and the demand continues to increase, meaning that the value of this scarce resource is likely to appreciate over the long term, providing investors with unique investment opportunities.
Preqin’s Natural Resources Online profiles 107 Asia-Pacific-based investors with a preference for water assets, representing 34% of all investors in the region. Europe- and North America-based investors make up much smaller proportions: 21% and 13% respectively. Contrastingly, 19% of investors worldwide target assets in the water sector, a relatively small proportion when compared with energy (87%) and timberland (31%).
Within Asia-Pacific, institutions based in Australia constitute the largest proportion (32%) of investors focused on water assets, followed by India (14%) and Japan (11%). HOSTPLUS, a superannuation scheme based in Australia, currently allocates 0.8% of its total assets to water investments. However, respective government reform initiatives in certain countries may soon influence investor activity in Asia-Pacific. Recently, the Japanese Government proposed regulatory changes to its water utility legal framework to encourage the use of private capital through PPP/PFI concessions; in China, the government is focusing on attracting private investment in the wastewater treatment industry.
Preqin’s Natural Resources Online reveals that 31% of investors located in Asia-Pacific are actively looking to make new commitments to water assets in 2017, more than those based in Europe and North America (26% and 13% respectively). New China Life Insurance plans to invest in the sector both directly and via unlisted funds across the US, Europe, ASEAN and emerging economies; Australia-based Christian Super will look to focus on the domestic market.
With a greater proportion of investors focused on water assets based in Asia-Pacific than any other region, it is likely this group of investors will be key to the long-term growth of the water industry.