Season 6, Post 35: “Water, water everywhere…”
“And not a drop to drink”, continues the famous poem. Almost 200 years after it was written, the words of Samuel Taylor Coleridge remain as relevant as ever. The global supply of freshwater per head is set to fall almost 30% by the end of this century relative to levels at its start, per the World Bank. At the same time, water demand is only heading one way. It takes 1500 gallons of water to make just one semiconductor chip. And, yes, you read that figure correctly.
It was cited by Xylem, a major provider of water hardware and software solutions at an investor event it held earlier this year. In order to learn more, we recently met with the Chief Growth and Innovation Officer of the business at Xylem’s headquarters, located on Water Street in Washington DC, appropriately. Your author is pictured standing in front of the impressive water feature that dominates the atrium.
“We need to simplify water” was the key message that Xylem was keen to share with us. The industry faces “myriad issues”, we were told, as a detailed piece in last week’s The Economist highlights. The combined economic losses from drought and flooding have cost the world $1tr over the period 2000-2020. As extreme weather trends become more pronounced, water may increasingly become a geopolitical issue, a topic we have been discussing since 2011.
How to simplify? It’s important to remember that not all people who work in the water industry are technologists (surprisingly few, is our anecdotal impression). Decision-making at large, often state-owned water utilities can also move slowly. The role then for businesses such as Xylem is to act as “an enabler” via the provision of appropriate tools and a branch network of technical support from dedicated service technicians (called ‘AquaPro’ experts at Xylem). The deployment of AI can potentially lead to the faster identification and resolution of problems. Here, the water industry is “just scratching the surface.” Add in smart meters and better sensors and some of the problems, slowly, are beginning to be addressed.
We were pleased to learn separately that a new USAID-World Bank programme was launched at the end of August to provide basic water access to 12m people and basic sanitation to 9m in the Democratic Republic of Congo. The country has one of the lowest access rates to basic water and sanitation services in the world (35% and 16% respectively). As a reminder, Goal 6 of the United Nations’ SDGs is universal access to water and sanitation by 2030.
10 September 2024
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Xylem. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
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Alex Gunz, Fund Manager
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