Citi names companies gaining from water worries

by (author unknown), Blue Gold, European Water Partnership Blog on Jan 12, 2008

Investment analysts at Citi have identified 24 companies that are set to benefit from the effect of climate change on water supplies.


“Floods, droughts, and changing snow cover have long been newsworthy events. What’s significant now is that climate change is having a significant impact on those variables,” investment analysts Edward Kerschner and Michael Geraghty said in the 50-page Water Worries report.


Moreover, the analysts warned: “In many regions of the world where the supply of water is increasingly an issue because of climate change factors, there is also a growing demand for water.”


The thirst for water in the cities of emerging markets means European companies Danone and Nestlé, leaders in bottled water, are well positioned. Desalination of sea water will be increasingly relied upon to deliver fresh water, so the leaders in this field – Veolia Environnment of France and Doosan of South Korea – have good prospects. Veolia is also involved in wastewater treatment, a growing water sub-sector, especially in China and India.


Drought has affected eastern Australia particularly badly, but this may benefit local companies such as civil engineering group Leighton Holdings, which is part of a consortium building a sea-water desalination plant, and engineering company United Group, which is involved in fifteen water projects.


Meanwhile, drought in agricultural areas is also a contributor to higher global crop prices, such as wheat, which will raise the incomes of US farmers. They may spend more on agricultural machinery, such as from leading manufacturer John Deere. Developers of drought-tolerant crops, such as Monsanto, should also benefit.


Changing patterns of precipitation offer opportunities to dam builders, as a way to mitigate increasingly variable rainfall. The analysts point to Indian civil engineering firms Gammon India and Jaiprakash as two beneficiaries of this trend.