As a resource that is critical to life on Earth, it behoves us as stewards of the planet to look after water. Beyond answers to droughts and floods, and the damage they do to the economy, other areas such as providing clean water and sanitation can have considerable benefits for society at large that extend from reduced healthcare costs to improved productivity.
Access to clean water and sanitation is recognised by the United Nations as a basic human right and is embodied in its Sustainable Development Goals (SDGs). In 2022, around two billion people lacked access to safely managed drinking water and almost 50% of the global population lacked access to safely managed sanitation services, primarily in sub-Saharan Africa and Oceania (see Exhibit 1).
On World Water Day 2023, with its focus on SDG 6 – ensuring universal access to safe and affordable water by 2030 – we look at the impact that investment in infrastructure, providing sanitation facilities, better hygiene and the protection of water-related ecosystems can have.
Research by WaterAid and Vivid Economics estimates that a dollar invested in water, sanitation and hygiene generates a return of USD 21.
- Ensuring all people have access to a toilet connected to a safe waste management system could result in USD 86 billion per year in increased productivity and reduced health costs.
- Access to handwashing facilities could yield USD 45 billion per year.
- Ensuring all households have a tap could deliver USD 37 billion per year.
Water stress is growing across all continents. Around 19% of total water withdrawals are used for industrial purposes, such as the production of clothing, food and energy, alongside the 70% used in agriculture every year. If current practices continue, water demand could exceed current supply by 40% by 2030. By 2050, the number of people experiencing water stress could double.
Poor infrastructure contributes water stress. For instance, persistent flooding, operational failures, understaffing and decades-long infrastructure decay led the main water treatment plant in Jackson, Mississippi to break down. Some 180 000 residents were left without safe water – even for brushing teeth or giving to pets, while there was not enough water to flush toilets, fight fires or meet other critical needs.
Another infrastructure problem is leaky pipes, which result in an estimated loss of 126 billion cubic metres of water a year, costing USD 39 billion.
Ultimately, these factors are leading to more acute events – when municipal water supplies are switched off – as seen in Australia, South Africa, India and the US.
Regulation and engagement
There are regulations in place that set standards for water infrastructure, some of which are listed below, but without investment it will be difficult to meet the requirements involved.
Examples of legislation around the world:
- US: Clean Water Act
- EU: Water Framework Directive
- India: The Water (Prevention and Control of Pollution) Act
- South Africa: The National Water Act 36 of 1998
We also believe engagement can contribute to pushing companies to identify water-related issues and come up with solutions. In 2022, we took part in the annual CDP Non-Disclosure Campaign designed to encourage companies that have a big impact on climate, forests and water to improve their disclosure. We selected 379 companies to engage with by signing joint letters (on all three topics) and we led engagement with 14 companies with a focus on forests and water.
What are possible solutions?
The most cost-effective solution to addressing water loss is leak management. This includes technologies such as acoustic sensors, blockchain and satellites to detect leaks. Improvements to filtration and wastewater treatment would bolster freshwater supplies.
One option gaining traction worldwide is desalination. There are two main types: thermal desalination and membrane desalination (mainly based on reverse osmosis). The latter is used most commonly. Challenges that need addressing include energy consumption and pollution.
Another method is granular activated carbon (GAC), which uses materials including coconut shells, wood or bituminous coal. The process, alone or in combination with an ultraviolet disinfection system, can remove contaminants such as organic materials, drugs and disinfection by-products. GAC is environmentally friendly as it can be reactivated via thermal oxidation and used multiple times.
In addition, we should mention solutions to limit water consumption and improve efficient use. Mandatory 25% cuts in California in 2015 were achieved through reducing use and water efficiency. This proved to be more cost effective than using desalination plants which can be expensive to build and run.
Part of the problem is a failure to sufficiently value water. According to UNESCO, water is often viewed exclusively in relation to its cost price without accounting for its holistic value, which is almost impossible to put a price on.
In response, the World Economic Forum established the Commission on the Economics of Water to advise on water management. The group is considering advocating for a global price for freshwater and explores incentives to maintain water supplies.
Some companies are setting up their own internal prices for water and it has even been suggested that a futures markets for water should be set up. These measures have been met with a mixed response despite potentially alleviating the USD 320 billion per year government burden to subsidise safe water supplies.
Investment opportunities range across water infrastructure, water treatment and utilities. There are also indirect ways in which invested capital can improve water consumption in both industrial processes and agriculture.
Investment in innovative and emerging technologies has the potential to ensure everyone has access to safe, clean water and sanitation.