Despite water’s strategic importance, it has historically been underrepresented in investment portfolios. This is beginning to shift. Amid economic uncertainty and market volatility, water solutions offer a versatile, forward-looking investment opportunity essential for addressing climate risk. Water’s unique role in the global economy, its relationship to climate change and its diversification potential together make a compelling case for investing in water solutions. Indispensable to the global economy: Water is a foundational input for nearly every sector of the global economy. While its importance in agriculture and public health is well known, water is also critical for manufacturing, semiconductor fabrication, data centres and energy production. In fact, 40% of water withdrawals in high-income countries are used for industrial purposes, highlighting the scale of this dependence.9 As industrial demand continues to rise, there is a growing need to invest in water solutions that support long-term resource availability and help ensure the resilience of leading economic sectors. Climate risk imperative: Investing in water is a critical risk-mitigation strategy in the face of an increasingly off-balance hydrological cycle. From prolonged droughts to extreme floods, climate change is intensifying water-related risks across sectors and geographical areas. Investments in water efficiency, flood control, wastewater reuse and nature-based solutions help reduce climate risk.10 Underscoring the urgency for businesses, estimates suggest that the cost of water risks to business could be more than five times greater than the cost of taking action now to address those risks.11 As the public and private sectors increase commitments to safeguard against the impacts of climate change, the demand for resilient water infrastructure and technologies is expected to grow significantly. Diversification potential: Water assets can enhance portfolio resilience due to their low correlation with traditional asset classes, helping reduce overall investment risk. An analysis of leading global water exchange-traded funds (ETFs) found that water assets serve multiple vital roles: acting as a diversifier for equities; as a counterbalance for fixed-income investments; and as a safe haven during periods of market volatility. This robust evidence underscores water’s valuable contribution to portfolio stability and risk management.12 The growing imperative to address climate risk, combined with the universal demand for water in all sectors of the global economy, positions water solutions as a robust and progressive investment opportunity. The water landscape is rapidly transforming, driven by innovation and policy momentum. Emerging water solutions, including smart monitoring systems, decentralized treatment technologies, water-efficient agricultural practices and circular water models, are creating new investment pathways that will be explored later in the paper.13 While the financial rationale for investing in water is compelling, the urgency of global environmental and social challenges underscores the fact that such investments are not only prudent but essential for planetary health and sustainable development. This paper will now turn to the need for water investment from environmental, economic and social perspectives.1.2 The water investment opportunity The world faces a growing water crisis, with all indicators showing that demand will continue to rise over time. The overview below highlights some of the most pressing water challenges and how they align with primary investment themes. Investment theme: People and consumption patterns Over the past three decades, total water withdrawal has increased by more than 650% while per capita water availability has declined.14 The world’s population has grown rapidly, estimated to jump from 2.5 billion in 1950 to 10.3 billion by mid-2080. Feeding a population that has by now more than tripled requires more water, a problem compounded by a rising middle class projected to shift to more water-intensive crop production and increased meat production. Investment theme: Cities and urbanization In parallel, rapid urbanization will lead to approximately 60% of the world’s population living in urban areas by 2050, outpacing public infrastructure, freshwater resources and regulations. Many global water networks are now outdated, with ageing infrastructure in both developed and developing countries struggling to meet the increased water demands. As an example, most of the existing water networks in the US were built in the 1950s and 1970s and would require significant reinvestment and modernization to avoid potential public health and environmental hazards.15 1.3 The growing drivers for water demand40% of water withdrawals in high-income countries are used for industrial purposes.70% of global freshwater withdrawals are used for agricultural purposes. Investing in Water: Aligning Investment Strategies with Water Innovation 9

Investing in Water Aligning Investment Strategies with Water Innovation 2025