Is water one of the most critical investment themes of the decade?

Key takeaways: Utility capex spending across water segments is projected to rise at a compound annual growth rate (CAGR) of 4.3% through to 2030[1] Industrial spending on water-related investments is being driven by growth, productivity gains and operational necessity, with total spending projected to exceed $203 billion by 2030[2]  Water demand from data centres, semiconductor fabrication plants and associated power generation is projected to more than double from 2020 to 2050[3]

Earlier this year, the UN warned that global renewable water use now exceeds natural replenishment. The world, they said, has now entered an era of “global water bankruptcy”. This is expected to have clear and sizable financial consequences, with one estimate suggesting water shortage could lower global GDP by an average of 8% by 2050.[4]

In regions with extreme water stress, infrastructure acts as a primary safeguard for economic stability. The UAE uses desalination as the dominant technology to make seawater potable: approximately 42% of its drinking water comes from some 70 major plants.[5] 

Water is rapidly becoming one of the most strategically important investment themes. Once viewed as a stable, slow-moving utility segment, it’s now undergoing a structural shift driven by climate pressures, demographic change, industrial expansion and the accelerating adoption of advanced technologies like AI driven water management and desalination. 

It’s also a key theme for our Stewardship team, which has written extensively about the subject for many years.

Below we explore three key reasons why we believe water presents one of the most critical investment opportunities of the decade.

1.     Utility spending surge to meet rising demand

Water is not discretionary; it’s a necessity. This is driving growing levels of capital expenditure (Capex) across utility systems globally, creating potential opportunities for investors: 

• Europe is implementing its biggest water regulation upgrade in 30 years, expanding the Urban Wastewater Treatment Directive and tightening rules on micropollutants. 
• The UK is grappling with one of the world’s oldest water networks, with pipes averaging 70 years in age. The government’s new water framework approves a £104 billion investment to address leakage, pollution and climate resilience. This comes amid significant regulatory changes.
• In the US, tightening PFAS (popularly known as ‘forever chemicals’) regulation is becoming a major catalyst for water sector spending. 

These programmes are tied to essential-service provision, regulatory compliance and public health, suggesting water utilities will benefit from predictable, regulated earnings; long term capex visibility; and defensive characteristics with multiyear commitments. 

2.     Industrial spending acceleration

Water is increasingly becoming a critical operational resource for industries navigating sustainability pressures and rising production demands. Sectors such as data centres, manufacturing, energy, agriculture and chemicals are accelerating investment in water efficiency, wastewater recycling, advanced contaminant removal and regulatory compliance. Again, this may create opportunities for investors with exposure to companies able to provide these solutions.

At the same time, industrial water costs are climbing, and long‑term supply security is far less certain than it once was. 

This challenge also creates an opportunity by rethinking how water is managed onsite. Businesses can turn what was once a cost and compliance challenge into a strategic driver of efficiency, resilience and operational stability. As a result, total spending by the industrial sector on water-related investments is projected to exceed $203 billion by 2030.[6] 

While upstream oil and gas is still expected to account for 24% of all industrial water management spending, technology driven industries, especially data centres and microelectronics are emerging as the fastest growing segments. 

This growing spending marks a structural break from the past. Beyond routine maintenance, investments are driven by growth, productivity gains and operational necessity. As a result, water is emerging as both a resilience theme and an efficiency opportunity. 

3. AI, data centres and digital water 

Advanced technology is creating structural demand for advanced cooling systems, filtration technologies and water treatment solutions – and opportunities for solutions providers. 

For example, semiconductor manufacturing is expected to become 113% more water intensive by 2050.[7] While water demand by data centres, semiconductor fabrication plants, and associated power generation is projected to more than double overall, semiconductors annual water withdrawal is expected to rise by +613% between 2020 and 2050, with one in every three located in high water-stress areas.[8]   

The surge in water demand from semiconductor fabrication and data centres is driving significant capital investment toward industrial water management and specialised treatment technologies. 

While mining, food and beverages, and microelectronics are today the industries with highest water capex, a compound annual growth rate of more than 14% is projected in data centre-related capex.

Simultaneously, digitalisation is transforming water management itself. Across utilities and industry, companies are adopting smart meters, sensors and remote monitoring, predictive analytics, and AI-enabled optimisation. 

Digital water remains a high-margin business area. In 2025, more than $1 billion of third-party equity capital flowed into water tech companies, especially for AI-enabled water solutions, such as smart meters, predictive analytics and real-time flood forecasting.[9] 

These three forces – essential utility spending, rising industrial capex and technology-driven growth – present structural drivers for the water theme, in our view. Water is evolving into a theme that spans defensive stability, structural growth and innovation, creating what we believe to be a compelling critical investment theme.

 

Key risks

Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.

[1] Source: GWI, as at February 2026. Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.
[2] Source: Global Water Intelligence, as at January 2026.
[3] Source: https://amp.xylem.com/m/aa10f8022757c5e/original/Watering-the-New-Economy-DIGITAL-final.pdf

[4] Source: Global Commission on the Economics of Water, as at 2024.
[5] Source: https://u.ae/en/information-and-services/environment-and-energy/water-and-energy/water

[6] Source: Global Water Intelligence, as at January 2026.
[7] Source: https://amp.xylem.com/m/aa10f8022757c5e/original/Watering-the-New-Economy-DIGITAL-final.pdf

[8] Source: https://amp.xylem.com/m/aa10f8022757c5e/original/Watering-the-New-Economy-DIGITAL-final.pdf

[9] Source: Global Water Intelligence, as at January 2026.