Regional fresh water supplies face rising stress in spite of the planet’s seemingly abundant resources. Without laws and regulations to ensure that demand equals sustainable supply in populated arid regions, water risks running short.
The task for governments, especially now that the United Nations has enshrined water as a human right, is to deliver reliable and equitable access by attracting investment capital to build the necessary infrastructure. The opportunity for investors increasingly sensitive to Environmental, Social and Governance (ESG) concerns lies in fostering the expansion of water rights markets that ensure sustainable supplies and offer an attractive return.
Water is cheap but heavy, which makes it costly to move long distances. But healthy water markets attract investment in infrastructure that will move it from where supply is abundant to where demand is rising. The drivers of water rights values include water scarcity, demand changes, depleting aquifers, high water utilization and legal frameworks. Good policies start with an acknowledgement that a region’s current water use is unsustainable and include the institution of water regulatory bodies, as well as the means of matching demand and supply through a voluntary exchange of water rights—most often through water rights markets.