“Taiwan is a water-scarce area, so Taiwan Semiconductor has developed innovative practices,” Ms. Huang said. “They recapture, refilter and reuse their water three times.” Semiconductor plants gulp down huge quantities of water, and, though Taiwan receives plenty of rainfall, it has little ability to store it. Ms. Huang said Calvert views smart water handling as prudent risk management for chip-makers like Taiwan Semiconductor. “It puts them in a better position competitively, and they’re a market leader in the semiconductor space.”
Invesco acquired its third offering, the S&P Global Water Index E.T.F., when it bought Guggenheim’s line of E.T.F.s last year. Like Water Resources, this fund also invests mainly in the United States, but the two aren’t twins, said J. Jason Bloom, senior director of Global Macro E.T.F. Strategy at Invesco. Water Resources has “more focus on companies developing technology around delivering clean water,” while the S&P index fund leans more toward utilities, which make up about half of its assets, he said. The S&P Global Water Index fund returned an annual average of 11.05 percent for the decade that ended in June.
Some investors shy from the sector because “a lot of people see publicly traded water utilities as water privatizers,” said Julie K. Gorte, senior vice president for sustainable investing at Impax Asset Management. Water, in this view, should be publicly owned and controlled to ensure that everyone has access to it. In reality, “municipalities often contract with water utilities” and regulate their service provision, Ms. Gorte said.
Robert Glennon, a water-law expert at the University of Arizona’s Rogers College of Law, said some of the distrust of private-sector control of water supplies may stem from misunderstandings of what customers pay for and where most fresh water goes. “Water may be a gift from God, but God doesn’t give us pipes, and pipes are expensive,” he said.
Household water accounts for only a small portion of water consumption — in the United States, about 7 percent, Professor Glennon said. The rest is used by farms and industry. And they have little incentive to use it prudently because nearly everyone in the United States pays little for water, he said.
“Our water supply is like a giant milkshake, and each diversion is a straw in the glass. People have a sense of our water supply as infinite, but in reality, it’s finite and exhaustible,” he said.
Economists, starting with Adam Smith, have long pondered the diamond-water paradox. Simply put, it’s the puzzle that fresh water is essential for life but cheap, while diamonds are a mere ornament but costly. The difference, of course, was water’s abundance.
Today, Mr. Smith might still be flummoxed by the price of diamonds, but investment possibilities of water he might attribute to his favorite market forces: supply and demand.