Drought Profiteers: How Wall Street Plans to Cash in on Crisis

Published Sep 14, 2023

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Clean Water

Amid drought and shortages, Wall Street bets that it can pull profits by hoarding water, raising prices, and worsening the crises.

Amid drought and shortages, Wall Street bets that it can pull profits by hoarding water, raising prices, and worsening the crises.

We all depend on water for survival, and access to it is a human right. But that access faces threats on multiple fronts, from industrial pollution to climate change-driven drought

For a growing group of Wall Street investors, they don’t see this as a crisis — they only see dollar signs.

A disturbing trend has emerged across the globe and in the United States. Growing water markets are turning our increasingly endangered water supply into a cash cow to be milked for all its worth — even if that means depriving families and the environment of this priceless resource.

Water Markets Raise Prices So Companies Can Profit at Others’ Expense

In the United States, water rights regimes and water markets are allowing investors to wring profit from a public resource. Owning a water right, or claim, authorizes people to pull public water from a specific source. Water markets allow claim-holders to lease or sell their claims to the highest bidder.

Prices on these markets have risen in many parts of the world, including the American West, thanks to drought and shortages that make water more scarce and precious. This upward trend has attracted investors who want to capitalize on water shortages.

They can do this in several ways. One is through water hoarding. By buying up water rights, investors can make water even scarcer and drive prices higher. This allows them to profit by betting on price changes with financial tools like futures or by selling their water claims after prices rise.

This hoarding has alarming consequences for the environment and for families. It decreases water availability in areas already struggling with shortages and even shutoffs

The high prices also translate to higher water bills for families during a nationwide affordability crisis. In some Western states, water rates have grown four-fold in a 20-year period. Hoarding makes clean, safe water out of reach for many communities and families.

By design, water markets revolve around those who hold water claims and those who can pay the most for them. They exclude those who can’t pay the high prices (low-income communities and small municipalities, for instance) and those who can’t participate in the market, such as the local ecosystems that depend on the water source. 

We’ve already seen how this plays out in other countries. For example, Australia’s water markets failed to recognize the needs of the rivers and ecosystems. As a result, they didn’t allocate enough water to ensure healthy rivers and wetlands.

Wall Street’s Feeding Frenzy on Water Claims

Some of the world’s largest investment banks have already spent hundreds of millions on water claims. Many, including UBS and Banks of America, are buying up farms and other lands that come with water claims attached. 

Some firms say they’re trying to help farms become more efficient with their water use so they can sell off the excess. But just as likely, they’ll abandon the farm, hoard the water, and sell it in times of drought when prices soar.

Companies are also buying up water from rural towns or small farms to turn around and sell the water at a higher price to suburbs and golf courses. 

And while we know that drought profiteers have bought thousands of acres of land and hundreds of thousands of acre-feet* of water, exact accounting of their hoard is impossible. It’s common practice for big companies to buy land and water through subsidiaries to obscure their dealings. And thanks to shady finance laws, companies can also keep their holdings secret as “financial information.”

Want to learn more about how Wall Street plans to profit off water crises? Read our recent fact sheet, “Wall Street’s Water Grab.”

Wall Street Drains Priceless Groundwater Supplies

In much of the United States, people get their water from natural underground sources. We access these groundwater aquifers by digging wells and pumping water out. Some of this is “fossil water” that has been in the ground since the Ice Age. If emptied, these ancient aquifers will never fill again. 

Water markets incentivize companies to overpump these wells, pulling more water than the aquifer can naturally replenish. They also incentivize the digging of new ones — and with deeper pockets come deeper wells.

Wealthy investors and corporations can drill far deeper and access more water than any municipality or family farm can afford. By drawing on deeper wells, they also lower water levels in shallower wells, many of which belong to small towns and families. 

Due to groundwater overpumping, many have seen their household wells go completely dry. For those who still have water, the lower levels mean higher concentrations of existing pollution, threatening their health.

Groundwater pumping can even cause the ground to sink, or subside, which threatens essential infrastructure like roads, bridges, and pipelines. In California’s Central Valley, subsidence due to drought and groundwater pumping has led to damages in the billions of dollars.

Investors know their drilling isn’t sustainable and won’t be possible in a few short years. But that doesn’t matter to them — they expect to make their money long before that time comes. 

Water Is a Right, Not a Money Maker

Treating water as a commodity, instead of a right, has contributed massively to our country’s current water crises. It has driven the boom of thirsty crops in America’s deserts, the rampant attempts to privatize public water and sewer systems, efforts to expand our country’s water markets, and the growth of Wall Street’s water grabs.

We need to stop these drought profiteers. The federal government should require private companies to report the water claims they hold, and it needs to ban profiteering and speculation on water resources. 

But ensuring safe and reliable water for all goes beyond that. To address our water woes, we need all levels of government to recognize and protect water as a public trust resource. They must recognize water as a human right, and they must steward water for people and the planet — not profit. 

The WATER Act will provide permanent support for safe, affordable, and publicly controlled water. Tell your Congressmember to cosponsor the WATER Act!

* An acre-foot is a measurement of water equal to the amount it would take to cover an acre of land with water a foot deep. One acre-foot is about 325,851 gallons.

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