Rahul Bhushan, Global Head of Index at ARK Invest Europe, delves into some of the innovations and strategic approaches emerging to help the progress of what stands to be an ‘enormous’ investment trend of addressing the volume of water being used in the agricultural sector.
Agriculture is responsible for more than 70% of total water used in many regions. That’s more than three times the amount collectively used by all other industries.
Agriculture’s contribution to global water scarcity is such a large and unavoidable issue, that early investors in solutions to the problem could well be set for outsized, long-term returns.
This reliance is a major reason why global water demand has grown at twice the rate of the human population over the last century. It has also played a large role in the fact that some 1.1 billion individuals worldwide now lack access to water.
All told, there’s clearly an urgent need to address the volume of water being used in the agricultural sector. Here, we take a look at some of the innovations and strategic approaches emerging to help the progress of what stands to be an enormous investment trend:
- Improved water management
Precision agriculture technology has advanced to the point where farmers can ensure crops receive exactly what they need, exactly when they need it. The American Society of Agricultural and Biological Engineers even found that the equipment could now reduce water usage by 30% while maintaining or enhancing crop yields.
Big data analytics and AI, meanwhile, are being adopted as a method of optimising irrigation schedules and quantities using data processed from various sources.
This could have remarkable potential in conservation. Lindsay Corp’s innovative irrigation solutions, for example, deliver water directly to plant roots, dramatically reducing evaporation and runoff losses.
Source: TSE, “How to Install Drip Irrigation”, 2023. Available at: https://morfreeov.xyz/product_details/84151209.html
According to the Food and Agriculture Organisation, this method of “drip irrigation” can increase water efficiency to more than 90%. That compares to traditional flood irrigation, which is often less than 50% efficient.
- Advanced crop and soil science
Advances in crop science are leading to the development of genetically edited crops that demand less water and exhibit greater drought resistance.
Innovators are now producing crops modified to thrive in saline or otherwise non-arable soils. This expands the usable agricultural land base and reduces its water footprint while bolstering food security and availability in an increasingly unpredictable climate.
The science behind soil itself is also playing an increasingly pivotal role. By enhancing inherent organic matter and structure, scientists are finding ways to increase, for example, the water-holding capacity of certain soils. This can significantly diminish the need for irrigation.
- New water sources
Desalination stands as a beacon of hope for water abundance, particularly for arid regions and coastal communities.
The key lies in harnessing renewable energy sources to power desalination plants. Solar and wind energy are paving the way for eco-friendly and cost-effective desalination processes at a much lower cost than in years passed.
With unlimited seawater as a resource, desalination has the potential to create a consistent and controlled supply of water, insulated from the variability of climate change.
Source: TSE, “How to Install Drip Irrigation”, 2023. Available at: https://morfreeov.xyz/product_details/84151209.html
Meanwhile, purifying and repurposing wastewater for irrigation not only mitigates the draw on freshwater but also enriches soil with nutrients from the treated water. The integration of such systems can transform waste into a valuable asset for agriculture.
- Education, policy, and incentivisation
Technology aside, sustainable water use also demands systemic solutions. These must, of course, encapsulate policy, governance and societal engagement.
Effective water management policies must prioritise conservation and innovation. They must also incentivise farmers through subsidies for adopting modern irrigation systems while recognising water-saving practices in regulatory frameworks.
Governance, on the other hand, should ensure these policies are implemented efficiently and adapted to local conditions. This will foster collaborations between government entities, private sectors, and farmers.
In parallel, educational initiatives are essential for promoting understanding and adoption of sustainable practices. Water management courses must be integrated into agricultural education and ongoing training must be provided to farmers for the latest water-efficient technologies. In doing so, we can empower the very people responsible for the stewardship of land as agents of change.
Navigating troubled waters
Given the sheer scale of the water scarcity issue, the ongoing maturity of the innovations and strategic approaches we’ve outlined here is not just a nice idea… it’s unavoidable.
With this in mind, those looking for a new way of getting exposure to a sustainable investment trend may want to act now rather than later. The companies that end up leading the way in driving sustainable water use in the agriculture sector could hold the key to strong long-term returns.
Rahul Bhushan is Global Head of Index at ARK Invest Europe
