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Up to 1.7 billion people will suffer from water shortages in 2020 and half of the population will face water scarcity in 2080, a recent UN report about global warming forecasts. While frightening, it also points to a new cash cow for the investment-savvy: scarce water can be a profitable business. It is quite clear that decreasing rainfall and growing deserts due to global warming will lead to less food. Demand for fresh air is also increasing as air pollution gets worse. Here in Korea, we may see greater protection of the environment due to the recently concluded FTA with the U.S., where both sides agreed to environment protection duties. Asset management companies, in any case, are swiftly introducing water and air funds.
¡ß Blue gold
Environmentalists who believe water is more precious than oil have dubbed it ¡°blue gold.¡± People, after all, have to drink water no matter how expensive it is. Already, China and India are seeing serious water shortages. China accounts for 21 percent of the world population but secures only 7 percent of fresh water. Statistics show that the volume of the Yellow River has gone down since 1972, and 70 percent of cities on its banks have been suffering water scarcity since 2003. About 80 percent of India relies on underground water supplies. Things are not so different in advanced countries. In the U.K, it is urgent to replace more than 50 percent of pipes from the River Thames, which are some 100 years old.
Through water funds, investors can put money into every stage of processing water. Investment destinations vary from enterprises to develop water sources and companies that build water supplies and drainage to sewage treatment. Hanwha Investment Trust Management and Samsung Investment Trust Management have already released water funds. Korea Investment Trust Management and Korea Development Bank Asset Management plan to release such funds shortly. "The annual average increase rate of the Bloomberg World Water index of utilities is 49 percent since 2003, which well exceeds the 28.92 percent increase rate of the Korea Composite Stock Price Index,¡± an insider with Samsung Investment Trust Management said.
¡ß Carbon trading
The Kyoto Protocol, concluded in 1997, mandates mostly developed countries to reduce greenhouse gas emissions by an average of 5.3 percent from 1990 levels between 2008 and 2012. Nations can trade "carbon credits." Countries or businesses which are below their quotas can sell remaining credits to countries or companies that are over their quotas. Carbon credits are currently traded at around US$10 -15 per ton.
The carbon credit market grew to $21.5 billion by the third quarter of 2006 and it is expected to grow to $150 billion in 2020. Carbon funds invest in carbon credits or technologies to reduce greenhouse gases. There are about 38 carbon funds in the world. Here, Korea Energy Management Corporation and other companies are going ahead with selling carbon funds valued at W200 billion (US$1=W929). "The more environmental issues are highlighted, the better the profitability of the funds," a Korea Energy Management staffer says.
(englishnews@chosun.com )
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