The EPA added $3.6 billion in fresh funding for U.S. water infrastructure this week. The funds bring the total earmarked for community water projects under the Biden administration for fiscal 2025 to $6.2 billion as part of the larger bipartisan $50 billion water infrastructure bill. That legislation provides grants and forgivable loans for disadvantaged communities without water security.
But the scale of the problem facing the EPA is daunting.
The federal government estimates that two million Americans currently lack access to clean drinking water with economically disadvantaged communities are particularly vulnerable. Almost one-quarter of households with access to private wells are subject to contamination.
Globally the problem is more dire, with estimates that as many as 2.2 billion people, nearly a third of the world’s population, lack consistent access to a safe water source.
An increasing number of companies focused on solutions for safer water are accessing capital from investors.
“From a long-term standpoint there is a massive backlog in water projects,” said Rob Day, partner and co-founder of Spring Lane Capital. The private investment company focuses on early stage investment in the energy, food, water and waste markets, backing infrastructure projects as well as investing in the startups developing them.
“There has been a critical lack of investment in the infrastructure for decades,” Day said.
In addition to replacing aging systems, new technologies also present opportunities. Day said technologies to mitigate per and polyfluoroalkyl substances (PFAS) — so-called forever chemicals present in waste management — are currently a major focus for his team.
Other investments include less water intensive data center technologies.
Water is a growing focus for public markets as well. The stocks of water technology and infrastructure provided have performed well in recent years. The S&P Global Water Index has returned over 11% so far this year, with a trailing 12 month return of over 32%.The Invesco S&P Global Water ETF CGW which mimics the index has slightly outperformed its benchmark year-to-date increase of more than 12%.
Investors seeking to allocate in the water segment have a number of other ETF options available. Invesco Water Resources PHO focuses on companies providing solutions specifically for the domestic US market while Global X Clean Water AQWA and iShares MSCI Water Management Multisector IWTR each hold international stocks in their portfolios.
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