Drought: Never let a good crisis go to waste
Date: 16 August 2012
“Never let a good crisis go to waste”, as the saying goes. Well investors are certainly not known for their passive reflection in times of crisis. As if food speculation wasn’t enough, the US drought provides yet another crisis for investors to take advantage of: water shortages.
Yesterday, Bloomberg Business News offered this headline: “Water Shortages Means 44% Return for Impax’s Water Strategy”. While this year’s annual US-based agriculture investment summit has a session entitled: “Water: the New Oil” with guest speakers from the Gates Foundation, Oxfam, the IFC (the World Bank’s private sector arm), Dow Chemical and Deutschebank, amongst others. How cozy.
Agricultural Investment Summit marketing:
In our innovative “WATER: THE NEW OIL?” session, we will focus on:
How investing in water through irrigation, treatment tech and owning rights can generate returns
- How the IFC views policy reform and tech innovation as a means to deal with water scarcity
- How technology can solve water constraints & regulatory challenges
- How to structure your Ag portfolio and allocations in light of climatic changes
- How other investors are responding to climatic changes and adapting their portfolios
For now, water investment is mainly focussed on equities and assets – it hasn’t yet reached the high-stakes, financialised derivative platforms we’ve witnessed in agricultural commodities. William Buiter, the chief economist of CitiGroup said just a year ago that “I expect to see a globally integrated water market for fresh water within 25 – 30 years. Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments – puts, calls, swaps – both exchange-traded and OTC will follow.” But is this all coming sooner rather than later? The ‘Ethical Water Exchange’ tool designed by Prana Sustainable Water is being marketed as a means to ‘protect’ the common good through commoditised water and the use of futures contracts.
Climate change will provide ever more opportunities for investors to make money. And to those who follow the free-market logic, this makes perfect sense – what we need is more money invested in water systems; and more money invested in large-scale agriculture to feed a hungry planet, they argue.
Well we may need more investment, but not of the kind being promoted here. Putting our public assets into private control is not going to yield better outcomes for people, as investors need constant high-level returns, while profiting from scarcity and high prices. WDM previously challenged the assumptions that private water services were better for the poor (they’re not); and we’ve demonstrated through our food speculation campaign that having more speculation and investors in commodity markets doesn’t lead to more and affordable food. Instead, it leads to more money being creamed off the top for the wealthy investor; while people go hungry or thirsty or both.
There are far better alternatives for meeting our water needs and feeding a hungry planet. Only greed is getting in the way.
