A water ETF (Exchange-Traded Fund) is an investment fund that pools money from investors to invest primarily in companies related to the water industry. These companies can include water utilities, infrastructure developers, equipment manufacturers, and technology providers involved in water treatment, purification, distribution, and conservation.
Water is a globally popular investment theme, prompting the availability of several ETFs tailored to this trend.
BlackRock’s water ETF, tracked under the ISIN code IE00B1TXK627 and listed on Xetra with the ticker IQQQ GY, stands out as Europe’s largest water-themed ETF, managing a substantial 2.2 billion euros. Its underlying index is the S&P Global Water index, comprising 57 shares predominantly from American companies. Notably, 54% of these companies are headquartered in the United States, followed by the UK (16%) and Switzerland (6.8%). The index comprises industrial and utility companies alongside various technology firms. Dividends from this ETF are distributed, with an average share return of 1.2%. However, it bears relatively high management costs at 0.65% annually.
Amundi offers the MSCI Water ESG Screened ETF, tracked via the ISIN code FR0010527275 and listed on Euronext Paris with the ticker WAT FP, managing close to 1.6 billion euros. Its underlying index is the MSCI ACWI IMI Water ESG Filtered Index, featuring 33 positions. Similar to BlackRock’s ETF, the majority of holdings are from US companies (57%), with the UK (22%) and Switzerland (8%) following suit. Dividends are paid out, and management costs are slightly lower at 0.6%.
Legal&General’s Clear Water ETF, tracked under the ISIN code IE00BK5BC891 and listed on Xetra with the ticker XMLC GY, though smaller in size, still manages a considerable 436 million euros. It follows the Solactive Clear Water index, comprising 54 positions. Similarly, the US (54%) and UK (15%) are prominent in the index, followed by Japan (10%) and Finland (4%). Dividends are reinvested for tax benefits, and management costs are comparatively lower at 0.49%.
Lastly, Xtrackers’ MSCI Global Clear Water&Sanitation ETF, tracked via the ISIN code IE0007WJ6B10 and listed on Xetra with the ticker XDG6 GY, manages 112 million euros. It tracks the MSCI AWCI Clear Water&Sanitation Select Index, consisting of 79 companies. Revenues are reinvested, and this ETF boasts the lowest management costs among the discussed trackers at 0.35%.
Investing in a water ETF offers investors exposure to the growing demand for clean water and the increasing need for efficient water management solutions globally. Factors such as population growth, urbanization, industrialization, and climate change contribute to the rising demand for water-related services and technologies, making water ETFs an attractive investment option for those seeking exposure to this thematic trend.
Water ETFs provide investors with diversification across various segments of the water industry, mitigating individual company risks. They also offer liquidity, as they are traded on stock exchanges like individual stocks, allowing investors to buy and sell shares throughout the trading day.
