Your Portfolio Does Not Need Water

Climate change has underscored the need for clean drinking water. Does that make investing in water funds a compelling option?

Bobby Blue 22 September, 2021 | 1:27AM
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Water

Sitting at the intersection of two key trends in investment management--environmental, social and governance investing and thematic investing--are water funds, which seek to invest in companies that are leaders in limiting their water usage or creating innovative solutions to increase the availability of clean drinking water.

There are countless ways to justify an investment as influencing clean water availability, and this flexibility, exercised at the discretion of the manager, leads to a broad investment menu. As a result, their portfolios are often watered down with holdings that may have little to do with the business of water, which drives performance that resembles common equity indexes rather than anything differentiated.

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About Author

Bobby Blue  

Bobby Blue is a manager research analyst for Morningstar.

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