Thematic Pulse water technology

THEMATIC PULSE | SEPTEMBER 2026

Investing in water technology and infrastructure: why now? The investment case for water is not new. However, it currently Andreas Fruschki, CFA CIO Thematic Equity looks particularly compelling as the theme combines a defensive A physical-asset theme with demand profile, physical minimal disruption risk infrastructure with minimal disruption risk, regulatory visibility, Water is fundamentally a hard-asset relatively stable returns, and theme. Its value chain consists Christian Zilien, CFA Senior Product Specialist business models that can often of treatment plants, distribution Equity pass through inflation. In addition, networks, pumps, valves, pipes, a major wave of infrastructure meters, filtration systems, testing replacement and adaptation still equipment and wastewater facilities. lies ahead and is likely to continue These assets cannot be digitised for decades. away, and most have useful lives measured in decades 4. Technological Unlike many fashionable investment change can improve how water is themes, water does not depend on transported, monitored, purified or consumer adoption, a particular reused, but it cannot eliminate the technology platform or uncertain underlying requirement for future monetisation. It is an essential physical infrastructure. economic input whose infrastructure has been underfunded for decades,1 This distinguishes water from the while demand is growing and AI theme. A municipality cannot natural water availability and postpone the provision of safe quality are coming under increasing drinking water indefinitely because pressure. 2 At the same time, the a new technology may emerge, valuation premium associated nor can a semiconductor plant with the earlier ESG boom has operate without ultrapure process largely unwound, 3 creating a more water. 5 Water also has no attractive starting point for long- economic substitute. term investors.

INVESTING IN WATER TECHNOLOGY AND INFRASTRUCTURE: WHY NOW?

Water scarcity is frequently local intended lifetime in many developed intensifying drought conditions and as transporting water over long economies.9 Ageing pipes, treatment reducing the reliability of existing distances is expensive,6 and this facilities, pumping systems and water sources.16 reinforces the importance of local storage assets increasingly need to treatment, storage, distribution and be repaired or replaced. Revised European wastewater rules reuse systems. extend treatment requirements, The United States has increased tighten nutrient-removal standards federal support for drinking-water, and introduce advanced treatment wastewater, stormwater, lead-pipe and monitoring for micropollutants, replacement and emerging- microplastics and PFAS.17 In the contaminant projects.10 Germany’s United States, PFAS drinking-water Inflation-resilient business new Infrastructure and Climate standards require investment models Neutrality Fund gives federal, state in testing, activated carbon, ion and municipal authorities greater exchange, membranes and the Much of the water infrastructure capacity to modernise essential handling of contaminated residuals.18 system is essential and regulated. infrastructure.11 And, across Europe, Water utilities frequently operate national infrastructure plans, as natural monopolies under EU programmes and regulatory multi-year tariff or rate-setting requirements are also pushing water frameworks.7 Subject to regulatory investment higher.12 Valuations have reset approval, necessary operating costs and capital investment can During the ESG boom, water- be recovered through customer related equities often traded at tariffs, while approved investment substantial thematic premiums, becomes part of the regulated asset which now has largely swung Increasing urgency: new or rate base on which the utility is back.19 Following significant relative permitted to earn a return.8 These demand, regulation and underperformance in 2024, 2025 mechanisms are not a perfect climate change and most of 2026, the entry point is inflation hedge – equipment and now materially more attractive than technology suppliers are not Data centres require water directly…