Is Water the New Blue Gold?

BusinessIs Water the New Blue Gold?

Is Water the New Blue Gold?

In January 2021, the CME group, a subsidiary of the Californian market, entered the water market with an index of $496 US dollars per 1233.5 m3.
A news that has caused debate among environmental activists, as well as Californian farmers.
The Nasdaq launched the first index to track rates, called the “NQH20”. The index was launched in Chicago, the American capital of natural values.

With NQH20,  Nasdaq dips in the pool

The Nasdaq, the Wall Street stock index traditionally specialized in new technologies, has just launched the Nasdaq Veles California Water.
Its goal ? Track the price of leases and sales of water rights in the five largest and most traded regions of California. Between 2012 and 2019, transactions totaled nearly  2.6 billion.
Water is becoming a scarcity along with unprecedented climate change in the United States, as the country slowly recovers from the worst presidential term in history, with former President Trump saying it was just an urban legend.
In 2020, more than 10,000 fires in California devastated nearly two million hectares.

2020, year zero of the water war?

If water is now a commodity, is a war on its way?
Some experts are betting on water scarcity for nearly 40% of the population by 2030 that would lead to migration and potential conflicts around sources – notably in India, Bangladesh and Africa.
But for CME, putting the water on the market will have no impact on developing countries. It is all about protecting Californian farmers.

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Protect California Farmers

According to index officials, this is all about protecting farmers in California, who are very numerous and fond of intensive cultivation.
“With nearly two-thirds of the world’s population expected to face shortages by 2025, there has been a growing risk to businesses and communities around the world, and in particular to the water market, which represents $1.1 billion water in California”, said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products.

Many activists, including UN envoy Pedro Arrojo, have raised questions on the “values”  versus its true cost for it to be discussed on World Water Day on March 22. 
“I call on everyone to launch a global debate on the values ​​of water,” he concluded on his Twitter account. Other analysts have said newly-elected Joe Biden might also put a hold on the index, since his political agenda is strongly pro-environmental. 
In only two days, the 46th U.S. President has re-signed Paris agreements, ended the Dakota XL Pipeline project and has re-joined the World Health Organization.
The above content is considered to be market commentary information and shall not be perceived as independent investment research or investment advice.