Wall Street's thirst for water

November 12, 2012
A global water market will push the price of food far beyond the peaks of the past five years, according to an article in Nature magazine.

Speculators can already bet on snow, wind and rain through weather-related future contracts bought and sold on the Chicago Mercantile Exchange. The market value of weather grew by 20% from 2010 to 2011. But the sector remains small — a paltry US$11.8 billion, according to an article in Nature, the international weekly journal of science, written by Frederick Kaufman, professor at the City University of New York:

"What global resource will be the next financial derivative? What could be more catastrophic than betting on the world's food supply? What about our water?" asks professor Kauman. He continues:

"Some environmentalists argue that putting a price on fresh water may be our best bet to save the planet's supply. The more it costs, the less we will waste. In fact, the financialization of precious resources underlies the Economics of Ecosystems and Biodiversity (TEEB), an international initiative hosted by the United Nations Environment Programme and supported by the European Commission, Germany, the United Kingdom, the Netherlands, Norway, Sweden and Japan."

"Investing in a water index is now more popular than ever. There are more than 100 indices that track and measure the value of stocks of companies in water-related businesses, such as utilities, sewage treatment and desalination."

Read the full article Futures market: Wall Street's thirst for water