In October, the administration of President Joe Biden issued a rule requiring drinking water systems across the U.S. to identify and replace lead pipes within 10 years. To go with that rule, the Environmental Protection Agency announced $2.6 billion in newly available drinking water infrastructure funding through the Bipartisan Infrastructure Law.
But that’s just a drop in the bucket when it comes to investment for water infrastructure in the U.S. and abroad. In a report to Congress last year, the Environmental Protection Agency estimated that the U.S. will need to invest $625 billion over two decades in drinking water infrastructure, based on data collected in 2021.
Globally, the world will need to invest up to $7 trillion for global water infrastructure by 2030 if it is to meet sustainable development goals after decades of underinvestment, the World Bank says.
“The water sector has a well-positioned setup from several drivers,” says Peter J. Klein, chief investment officer and founder of Aline Wealth. “From an industry perspective, you have a required resource for human life, for commerce and for food – a resource that is seeing increased demand from globalization and population growth and a challenged supply from climate change and urbanization.”
In short, one of the main themes water investors are concerned about is scarcity. Government investment is also another important component, as the public sector will often pay private companies to do the infrastructure improvement work.
But there are other factors at play as well.
“I think the water industry in 2024 is defined by themes like sustainability and tech innovation,” says David Materazzi, CEO of Galileo FX, an automated trading platform.
“The outlook for the water industry is bright, but not without risk,” Materazzi says. “While I think population growth and climate change will push demand higher, the idea that every water company will benefit equally is just wrong.”
Here’s a look at five top water companies and two water exchange-traded funds, or ETFs, that can spread out some of the risk:

American Water Works Co. Inc. (AWK)

A logical place to begin a list of water investments is with utilities. These companies offer a measure of diversification to a portfolio because people and businesses will need water regardless of economic conditions. While it’s unlikely that utilities will outperform growth stocks when the market is doing well, you’ll be glad to have utilities during market downturns when riskier stocks are out of favor.
American Water Works is one of the largest utilities of any type and is bigger than some electricity providers. As the largest listed water and wastewater utility in the U.S., the company provides services to residences, public buildings, and commercial and industrial businesses. It also has long-term military contracts that provide an extra layer of stability.
But there is more to water investing than pouring money into utilities.
“Professional investors dig deeper; they understand water stocks can be defensive but also volatile, especially when government contracts or big infrastructure projects get delayed or cut,” Materazzi says. “You can’t just assume water equals profit.”

Pentair PLC (PNR)

Over the years, this water treatment company has amassed a large stable of brands serving commercial, infrastructure, industrial, residential and agricultural customers.
It provides filtration, pump equipment, spray systems, commercial ice solutions, water and beverage equipment, water treatment components, and residential pool and spa equipment.
The company has a global footprint, with locations in North America, Europe, Asia and Australia, allowing it to take advantage of the global need for water solutions.
“In my view, AWK and Pentair are valuable because they address real-world problems, like water infrastructure and filtration,” Materazzi says. “Companies like AWK and Pentair are genuinely innovating, but not every stock in this space is a solid pick. There’s this idea that water scarcity alone will drive these stocks upward; it’s more complicated than that. Success depends on execution, strategy and staying ahead of competitors.”

Consolidated Water Co. Ltd. (CWCO)

Desalination is a high-growth-potential technology that may become more common as a source for fresh water. Consolidated Water is a seawater desalination company that supplies drinking water to two of the three most populated areas on Grand Cayman Island.
It has long-term contracts with government utilities in the Cayman Islands, the Bahamas and the British Virgin Islands, giving it exposure to the tourism industry in the Caribbean.
In addition to water-related products, the company also designs, constructs, sells, operates and manages water infrastructure.

Global Water Resources Inc. (GWRS)

This pure-play water resource management company owns and operates systems that provide water, wastewater and recycled water services to utilities operating in communities around metropolitan Phoenix and Tucson, Arizona.
This footprint positions the company in areas that have experienced some of the fastest population growth in the U.S., expanding the need for its water services.
The company is well positioned, since developers of new subdivisions will have to turn to recycled or imported water in addition to local underground supplies.

Valmont Industries Inc. (VMI)

Agriculture would be impossible without water. The industry provides food for the planet and fiber for clothing and is only becoming more important as the global population grows. Irrigation will continue to play a big role in agriculture, and Valmont makes center-pivot irrigation systems for watering crops. Those are the sprinklers that water circular agricultural fields.
Valmont also uses technology that can help farmers view their systems of pumps, pivots and crops and make decisions more efficiently. Beyond water products, the company also makes telecom towers, energy grid infrastructure and light poles.

Invesco Water Resources ETF (PHO)

Beyond water utilities, which are a bedrock for communities around the world, other companies are working on technology for water conservation and purification.
To help capture this value, Wall Street has created an increasing number of mutual funds and exchange-traded funds that can broaden investor reach and reduce risk.
“It’s true water is essential, but that doesn’t mean water companies are immune to market forces,” Materazzi says. “Regulations, competition and infrastructure issues affect them like any other sector.”
Investors who want to go the ETF route, either in lieu of individual stocks or in addition to them, can consider this fund. It invests in companies that create products that conserve and purify water for homes, businesses and industries.
PHO has an expense ratio of 0.6%, or $60 in annual fees on a $10,000 investment.

iShares MSCI Water Management Multisector ETF (IWTR)

This fund invests in companies that either derive a portion of their sales from sustainable water products or services or demonstrate relative efficiency in their water management. Companies that use water more efficiently can save substantial amounts of money.
The fund has an expense ratio of 0.47%.

Risk and Water ETFs

Keep in mind that these ETFs are niche. On the one hand, that’s a good thing if you want to express an opinion about water through your portfolio. But on the other hand, it does make these ETFs more risky, although they may be less risky than trying to pick individual water stocks.
“ETFs like Invesco Water Resources and iShares MSCI Water Management provide diversified exposure, which can help manage some of this risk, but even these are not immune to market volatility,” Materazzi says.
“PHO and IWTR are useful for diversification, but investors can’t just assume these ETFs are foolproof,” he says. “The market moves fast, and nothing is guaranteed.”