buiter30_ Ulrik PedersenNurPhoto via Getty Images_greenland water Ulrik PedersenNurPhoto via Getty Images

Water As an Asset Class Is Here

The technology and infrastructure for creating an integrated global market in water and water rights is advancing quickly, with promising new ventures entering the market. Give it another decade, and exchange-traded funds for water and water rights will be part of the new normal for investors.

NEW YORK – Just over a decade ago, I predicted the arrival of water as an asset class. I foresaw “a massive expansion of investment in the water sector, including the production of fresh, clean water from other sources (desalination, purification), storage, shipping, and transportation of water.” This would result in “a globally integrated market for fresh water within 25 to 30 years. Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments – puts, calls, swaps – both exchange-traded and OTC [over-the-counter] will follow. There will be different grades and types of fresh water, just the way we have light sweet and heavy sour crude oil today.”

In fact, I believed that water would eventually be “the single most important physical-commodity-based asset class, dwarfing oil, copper, agricultural commodities, and precious metals.”

Ten years later, the future is now – though not quite what I expected.

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