Investor LettersWater Under Pressure: Climate Risk and the Economics of Scarcity
The letter examines the growing economic implications of climate-driven changes to the global water cycle. Rising temperatures, shifting precipitation patterns, and increasing variability in water availability are placing strain on freshwater systems, while aging infrastructure and rising demand further exacerbate supply challenges. These dynamics are contributing to measurable economic consequences, including increased costs for water management, heightened operational risks for water-dependent industries, and emerging credit pressures for municipalities tasked with maintaining and expanding water infrastructure.
Against this backdrop, Redwood Grove emphasizes its focus on identifying underappreciated, structurally driven risks and opportunities. The firm views water scarcity and related infrastructure needs as a developing investment theme that remains insufficiently reflected in market pricing. Consistent with its disciplined and evidence-based investment approach, Redwood Grove seeks to evaluate these long-term trends with rigor and independence, prioritizing fundamental analysis and a willingness to diverge from consensus where supported by underlying data.
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