How Global Water Scarcity Is Creating Investment Opportunities in the 21st Century

The world faces a critical challenge that few investors are paying attention to: a widening gap between water demand and water supply. Unlike other commodities, water cannot simply be manufactured. This reality has caught the eye of some of the world’s most successful investors, including Michael Burry, the legendary hedge fund manager who predicted the 2008 financial crisis. Back in 2010, Burry publicly stated his belief that freshwater scarcity would become one of the biggest investing opportunities of our time, directing substantial capital toward water-related assets and productive agricultural land with reliable water access.

As urbanization accelerates globally and populations continue to grow, the pressure on water infrastructure intensifies. This structural shortage is creating a compelling investment thesis for those willing to look beyond traditional sectors.

Understanding the Water Investment Landscape

The Powershares Water Resource Portfolio (NASDAQ: PHO) represents perhaps the most straightforward way to gain diversified exposure to this trend. This ETF manages over $860 million across 38 companies worldwide that operate in the water sector. The fund captures the full spectrum of the industry—from utilities managing water supplies to engineering firms building infrastructure to manufacturers producing filtration equipment.

What makes this moment particularly attractive is the historical underinvestment in water infrastructure. For decades, policymakers neglected basic water systems, creating a massive backlog of upgrades and expansions. Analysts suggest the water investment theme remains in its early stages, with substantial growth potential ahead. Even if global water crises take years to fully materialize, the foundational work required to address them is happening now.

Engineering Solutions: Xylem’s Infrastructure Play

Among the major players in water technology, Xylem Inc (NYSE: XYL) stands out for its focus on efficient water management and waste treatment solutions. The company specializes in engineering solutions that help industries and municipalities extract maximum value from existing water supplies through advanced infrastructure technology, smart metering systems, and digital innovations.

Xylem maintains a significant presence in China, where rapid urbanization combined with a massive population creates enormous demand for sophisticated water systems. The company is also positioned to benefit from large-scale infrastructure spending. The incoming administration has signaled commitment to substantial public investment in modernizing America’s infrastructure over the next decade, with water security as a clear priority. Companies developing cutting-edge solutions for water infrastructure are likely to capture a meaningful portion of these capital flows.

Diversified Water Solutions: Pentair’s Market Position

Pentair plc (NYSE: PNR) takes a broader approach, providing products and services across water purification, filtration, irrigation management, desalination, and aquaculture systems. The company’s consumer-facing products have gained particular traction in regions facing water quality challenges.

Point-of-use filtration systems—devices installed at individual taps or in home water systems—represent a growing market segment. As consumer awareness about water quality increases, particularly in densely populated regions of Asia, demand for these products continues climbing. Industry analysts note that more residents in rapidly developing cities are seeking added safety measures for their household water supplies, creating a steady revenue stream for providers like Pentair.

An additional advantage for PNR investors: the company maintains significant exposure to the oil and gas sector. Following years of energy industry weakness, this exposure actually presents opportunity rather than risk. As energy markets stabilize, this business segment could become an unexpected earnings driver.

The Long-Term Investment Horizon

Michael Burry’s focus on water was prescient. While the water crisis may unfold over decades rather than years, the investment cycle is already underway. Infrastructure must be built, technology must be deployed, and systems must be modernized—all before acute shortages force reactive, more expensive solutions.

For investors with a sufficiently long time horizon, water represents one of the defining secular trends of the coming century. Whether through diversified exposure via ETFs like PHO or targeted positions in specialized operators like Xylem and Pentair, the water investment theme offers compelling risk-reward dynamics for those positioned ahead of the curve.