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The Looming Threat Of Global Water Scarcity

May 1, 2013
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WaterPolitics.com is a website and blog that addresses the geo-political issues relating to the growing water scarcity. On April 21st, “The Looming Threat of Water Scarcity” was published on its blogsite. While we have highlighted report below, the entire discussion is worth a serious read. The issue of agriculture and water will consume the global society, but also economic growth, investors and politicians over the next twenty to forty years and beyond.

Some 1.2 billion people, or nearly 1/5 of the world, live in areas of physical water scarcity. Another 1.6 billion face what can be called economic water shortage. The situation is only expected to worsen as population growth, climate change, investment and management shortfalls, and inefficient use of existing resources restrict the amount of water available to people. It is estimated that by 2025 fully 1.8 billion people will live in countries or regions with absolute water scarcity, with almost half of the world living in conditions of water stress. By 2050, it is projected that as much as 75% of the world’s population could face freshwater scarcity. The most challenging aspect of these life threatening statistics is that the likelihood of civil strife or violent conflict becomes evermore real given the scarcity of global water resources.

As the global population expands from its current 7 billion to between 9 billion and 11 billion by 2050 (United Nations, Food and Agriculture Organization (“FAO”)), demand from consumers, industry and agriculture will further stress water resources.  Whether climate change alters the supply and exacerbates the problem is open for debate, however, any changes to current rainfall patterns will surely complicate an already difficult problem.

Water scarcity is defined in many ways. Physical scarcity is when there is not enough water to meet demand; some of its symptoms include, severe environmental degradation, declining groundwater, and unequal water distribution. Economic water scarcity occurs when there is a lack of investment and proper management to meet the demand of people who do not have the financial means to use existing water sources or build appropriate infrastructure. For example, the Asia-Pacific region is home to almost 60% of the world’s population, yet it only has 36% of global water resources. Parts of northern China, India, and Pakistan currently suffer from both physical and economic scarcity. According to the U.N. FAO and UN Water, global water use has been growing at more than twice the rate of population increase in the last century.

Agriculture is one the most water-intensive sectors, currently accounting for more than 90% of consumptive use. Agricultural water withdrawal accounts for 44% of total water withdrawal among members of the Organisation for Economic Co-operation and Development (“OECD”), but this rises to more than 60% within the eight OECD countries that rely heavily on irrigated agriculture. Water use in agriculture is often inefficient, which has led to the over-exploitation of groundwater resources as well as the depletion of the natural flow of major rivers. While the growing world population is increasing the pressure on land and water resources, economic growth and individual wealth are shifting people from predominantly starch-based diets to meat and dairy, which require more water.

The scarcity of water is a growing issue. It is also a most challenging issue for policy makers, who for the most part have chosen to ignore the issue. It ramifications will change the political landscape of the world as well as the global economy. As investors, given the long-term nature of the issue we have time to structure portfolios to take advantage of the investment opportunity. Clearly, “Go long agriculture and water and go to the beach. Put those investments in the bottom drawer for 10 years. It’s unlike anything else we have in the world” (Laurence Fink, Chief Executive Officer of Blackrock).

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