Liquid assets: Why tomorrow’s investment returns depend on today’s water security
Freshwater may feel limitless when it flows from the tap, yet it accounts for less than 3% of Earth’s water – and under 1% sits in rivers, lakes and reservoirs that are readily accessible for human use. That small pool must serve farms, factories, cities and ecosystems, and demand is accelerating.
United Nations projections point to a 40% gap between global demand and reliable supply by 2030 if current usage patterns continue. In other words, the world is drifting towards structural water scarcity just as capital markets lean more heavily than ever on water-intensive industries.
Climate change is tightening the squeeze by shifting rainfall away from historical norms, turning once dependable catchments into drought-prone zones while intense downpours wash pollutants into what is left. Population growth, rapid urbanisation and ageing infrastructure magnify the strain, and because water is often undervalued or entirely unpriced, businesses have had little incentive to conserve it.
Half of humanity is already exposed to severe water scarcity at some point each year. Physical risk is therefore moving from the periphery of sustainability reports to the centre of earnings calls.
See also: Investing in water: A growing range of fund options
The digital decade has added a hidden thirst. A modern semiconductor fabrication plant can consume up to 38 million litres of ultrapure water every day—roughly the daily needs of 33,000 US households. An average data-centre meanwhile drinks around over 1million litres per day just to keep servers within safe operating temperatures.
When drought struck Taiwan in 2021, TSMC spent tens of millions of dollars trucking emergency supplies to its fabs, underlining how a regional shortfall can rattle global supply chains. Water-intensive requirements have even stopped several freshwater-scarce US states from hosting new manufacturing facilities altogether.
Agriculture still withdraws the dominant share of the planet’s freshwater, but chips, textiles, thermal power, beverage bottling, mining and cloud services now sit high on the risk register. All depend on reliable volumes of high-quality water and all face escalating exposure to rationing, tariff shocks and reputational damage as local communities compete for dwindling supplies.
Policy is catching up: Europe’s Corporate Sustainability Reporting Directive, IFRS S2 and the Taskforce on Nature-related Financial Disclosures each require clearer disclosure of water dependencies, pushing boardrooms to quantify and manage the threat.
The financial stakes are material. CDP calculates that nearly $600bn of corporate value could be hit by water-related disruptions — several times the estimated cost of proactive mitigation. Yet only a minority of listed companies have time-bound water targets, and fewer still build supply-disruption or scarcity pricing scenarios into their capital plans. Microsoft, for example, aims to replenish more water than it consumes by 2030. Investors who map those dependencies now and drive smarter water use will be the ones still pouring returns when every litre counts.