Global water crisis threatens ecosystems and infrastructure

What happened: Aging infrastructure and extreme weather conditions have led to widespread sewage issues in the U.S. and England. In the U.S., the American Society of Civil Engineers estimates $298 billion is needed to repair and upgrade wastewater infrastructure. In England, water companies released raw sewage into rivers and seas nearly 300,000 times in 2022 due to drought conditions. The House of Lords warns that without intervention, England could face water shortages of 5 billion liters per day by 2055.

Market impact: Water utilities and related services are affected. Companies like American Water Works (AWK) and United Utilities (UU.L) face potential infrastructure upgrade costs and regulatory pressures. The scandal has reignited debates around privatization, with some calling for renationalization. This could lead to valuation repricing and potential changes in regulation.

What to watch next: On March 1, 2023, the U.S. Environmental Protection Agency is set to release its 2022 Clean Watersheds Needs Survey, which could provide more detailed infrastructure needs. In England, the government's response to the House of Lords' report, expected in Q2 2023, will indicate policy direction. Additionally, water companies' earnings reports in Q1 and Q2 2023 will provide insights into the financial impact of these issues.