How water and waste combine sustainability and profitability

The water and waste industries have so far proved largely insulated from macroeconomic and political pressures impacting most investment sectors.

Water is essential for life on Earth, yet it remains an underappreciated and undervalued resource. Virtually every industry — from agriculture to manufacturing to energy production — relies on a steady and sustainable water supply. Simply put, there is no economy without water, but just as critically, there is no sustainable economy without effective waste management.

This theme has gained renewed attention as the planet recently marked World Water Day on March 22, a reminder of the urgent need to address global water challenges and ensure long-term sustainability. Similarly, with global waste generation expected to grow at twice the rate of the human population by 2050, the waste sector presents a significant long-term investment opportunity alongside water.

From an investment perspective, the water and waste industries share familiar structural drivers, long-term demand visibility, and strong regulatory support. This combination makes them particularly attractive for investors seeking stable, high-quality earnings. Companies operating in these sectors are supported by a favourable corporate environment and robust infrastructure requirements, generating highly visible revenue streams and consistent returns.

The investment landscape across the water and waste value chains offers access to different segments, each with its distinct fundamentals for active investors to capitalise on. Water and waste equities have consistently outperformed broader equity markets for nearly two decades, demonstrating resilience during downturns and capturing strong upside during market rallies.

Shelter from the tariff storm

While political and macroeconomic uncertainties continue to create headwinds for various sectors, the water and waste industries remain largely insulated from these pressures. In particular, much of the infrastructure underpinning these industries enjoys bipartisan political support due to the essential nature of the operations. Notably, many companies operating in this space are domestically focused, thereby reducing their exposure to global trade disputes and shifting tariff policies.

Despite evolving policy stances on sustainability in some parts of the world, water and waste-related businesses continue to benefit from strong demand fundamentals and regulatory tailwinds. The UK is a good example, where water companies have committed to investing £108bn ($140bn) between 2025 and 2030, underscoring the long-term growth trajectory of the sector.

At a corporate level, companies are increasingly prioritising operational efficiency, margin expansion and innovation to enhance long-term value. Many businesses boast strong balance sheets and are using financial strength to pursue share buybacks, which can create additional upside for investors.

While much of the wider investment conversation remains dominated by the Magnificent Seven and the wider AI theme, the market has been broadening in recent months, creating attractive opportunities beyond these high-profile themes. As investor focus expands, we expect stocks with strong fundamentals and lower valuations to benefit, such as those aligned with water and waste.

Moreover, with interest rates expected to normalise over the medium term, investor sentiment will likely improve, leading to higher volumes in investments related to the water and waste sector. The industry’s earnings growth outlook for the remainder of 2025 remains attractive, with close to double-digit expansion expected. This combination of resilient business models, high returns on capital and stable dividend payments makes the water and waste sector a compelling investment proposition for long-term investors.

Long-term corporate tailwinds

One company exemplifying the investment case for water and waste infrastructure is Advanced Drainage Systems (ADS), a US-based leader in stormwater and septic wastewater solutions. The company plays a crucial role in managing water flow in urban and rural environments, producing high-performance drainage pipes that redirect water away from roads, parking lots and fields to prevent flooding and maintain public safety. It is an interesting case study for portfolio managers.

Beyond drainage, ADS is also committed to water conservation and environmental sustainability. Its water quality products are specifically designed to filter and clean stormwater before it is returned to natural waterways, reducing pollution and improving overall water health. This focus on sustainability aligns with growing regulatory and corporate priorities, positioning ADS for continued success.

From an investment perspective, ADS benefits from strong market fundamentals, a competitive advantage, and a proven track record of operational and financial performance. Short-term demand for its products may fluctuate based on homebuilding activity, infrastructure spending and non-residential construction projects, but its long-term growth trajectory remains intact. As infrastructure investment expands, ADS is well-positioned to capitalise on the rising demand for advanced water management solutions.

Water and waste management remain crucial pillars of a sustainable economy, offering compelling investment opportunities supported by long-term structural trends. While near-term political and economic uncertainties persist, the sector’s resilience and growth potential remain firmly in place. As sustainability concerns increasingly shape global policy and corporate decision-making, businesses within this space are uniquely positioned to generate economic and environmental value.

Saurabh Sharma, co-manager of the Regnan Sustainable Water and Waste Fund at JO Hambro Capital Management