Water now a tradable Commodity on exchange, just like Oil or Gold!
CME (Chicago Mercantile Exchange) group has launched the first ever Water Futures on Nasdaq. The future contracts are for Californian water users and contracts are named as Nasdaq Veles California Water Index futures.
With these future contracts one can fix a price now for delivery of water in a future date. The idea perceived behind bringing in Water derivatives, to start with for California, is to help Californian water market users hedge price risk by providing a regulated, market-based solution, to budget the requirements based on changing climatic patters. This may also lead to better price discovery. This move is prompted due to worsening heat in the region, droughts and wildfires. If the prices of water are more regulated, humans may become more mindful about using water.
On the other hand, having water traded on bourses means we are allowing the most basic need of entire planet (all living organisms) being regulated by financial markets and keeping it open for associated speculative activities. Studies say, by 2025, two third of world population is expected to have shortage of water and we are just 4 years away from it. Intervention of financial markets may also polarise the water distribution in various parts of the world. We cannot compare Water trading with Oil or Gold, since we can still Live without these commodities, but we cannot Thrive a single day without Water.
Do we need to have water regulated though exchanges or rather, water usage should be regulated as per its end use, industries having extent of carbon footprint?
I see this as a primary step towards a paradigm shift to happen over this decade, no wonder at its dawn itself, we have received many alarming signals. We should be ready for severe climatic changing patterns impacting our lives, evolutionary changes in technology and financial markets. ESG Investing is expected to gain more importance for time coming.
What are your thoughts?
(You also relate this concept with the last clip from the Big Short movie, where Michael Burry invests in water.)
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