In recent years, water-related disruption has become an increasingly visible issue in the UK. In Royal Tunbridge Wells, a town historically known for its natural springs, repeated supply outages since late 2025 have left residents and businesses without running water. For local hospitality and retail, the impact has been immediate and tangible. More broadly across the UK water sector, issues such as sewage overflows and pressure on ageing infrastructure have highlighted how fragile water systems can be, even in developed markets.
For investors, these are not isolated incidents. They are a reminder that water is not just a basic resource, but a form of critical infrastructure underpinning economic activity. When it fails, the effects ripple across businesses, supply chains and communities, with wider implications for the economy and returns for investors.
Water challenges have traditionally been framed as environmental issues, often associated with more climate-vulnerable regions. However, this framing ignores a broader context in which water is increasingly interwoven with social and economic systems, and tied to key sectors such as agriculture, energy and public health.
Demand for treated water has grown far faster than accessible supply, with domestic use having increased globally by approximately sixfold since the 1960s.1 At the same time, much of the infrastructure designed to treat and transport water is under strain following decades of underinvestment, while more frequent droughts and floods are increasing the variability of supply. In more recent years, the emergence of artificial intelligence (AI) has also intensified demand, as semiconductor production and cooling systems for data centres are both very water intensive.
Water stress – where demand regularly exceeds available supply or quality is inadequate – now affects around half of the world’s population each year.2
The result is more frequent disruption to production, logistics and public services, making water a more immediate and financially material global risk. For companies, this can translate into higher operating costs, greater regulatory pressure and reputational risk, while for investors, it makes water increasingly relevant when assessing the resilience of business models and long-term value creation.
Against this backdrop, we incorporate water-related factors into our investment analysis through two lenses: managing risk and identifying opportunity.
Water risk can vary across sectors, and in many cases exposure may be indirect, sitting within supply chains or concentrated in specific geographies. Industrial companies, for example, depend on reliable water supplies for manufacturing, food producers need a consistent supply for crops and livestock and pharmaceutical businesses require treated water for research and production.
Understanding how companies assess and manage water-related risks – such as availability, quality and regulation – is therefore increasingly relevant to investment decision-making.
Alongside these risks, there is a growing set of opportunities linked to improving how water systems are managed.
One area is the modernisation of infrastructure. In the UK, the current regulatory investment cycle to 2030 represents the largest upgrade programme the sector has seen, aimed at strengthening resilience, reducing leakage and addressing environmental challenges. Companies such as Tetra Tech are contributing to this shift, bringing expertise developed in water-stressed regions to support UK utilities across network optimisation and storm overflow mitigation.
Another area of opportunity is the way these projects are financed. The Thames Tideway Tunnel, often referred to as London’s “super sewer”, is a clear example. Designed to significantly reduce sewage overflows into the River Thames, the project has also pioneered the use of a “blue bond” to raise capital specifically for sustainable water management.
Beyond public and private markets, some of the most effective solutions to water challenges are linked to protecting and restoring the natural environment. Watershed protection, wetland restoration and improved land use all contribute to the quality and availability of water downstream, and are often best delivered through collaborative, long-term initiatives. Here, venture philanthropy and strategic partnerships can play a valuable role.
Organisations such as The Nature Conservancy (TNC) have demonstrated how collaborative models can be used to fund and deliver these outcomes, bringing together public, private and philanthropic capital to support the natural systems that sustain water supply. Since 2022, LGT Venture Philanthropy has partnered with TNC to find ways to accelerate the rollout of local water funds – structures that finance the protection of upstream watersheds – leading to the launch of the Nature for Water (N4W) facility, which helps local partners to deliver solutions to water challenges around the world.
Download the report to explore the trends shaping investment risks and opportunities, and how they influence our approach to investing, stewardship and business operations.
The stability of our water systems can no longer simply be considered an environmental concern or niche sustainability topic. It is a key investment consideration, relevant to economies, company analysis and portfolio resilience. As an investment theme, water extends well beyond utilities and infrastructure: it cuts across sectors, geographies and asset classes, shaping how businesses operate, where supply chains are vulnerable and which solutions are likely to attract long-term capital.
Taken together, these dynamics highlight how deeply interconnected natural, economic, social and financial systems are, and why understanding those connections is increasingly important to managing risk, identifying opportunity and supporting long-term investment outcomes.
Discover more about the key themes shaping our sustainable investment approach in our 360 Report.
[1] Domestic Water Use Grew 600% Over the Past 50 Years | World Resources Institute
[2] Aqueduct 4.0: Updated Decision-Relevant Global Water Risk Indicators | World Resources Institute
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