Future contracts for water will appear on the markets for the first time in history. Future contracts are tied to the spot price of water and let investors bet on the price of water as the value of the precious resource goes up and down due to climate change.
Water will join gold, oil, and other commodities being traded on Wall Street with contracts financially settled just like any other futures contract. Contracts will each represent 10 acre-feet of water, equal to about 3.26 million gallons.
Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, explained why the water futures contracts were being issued:
“With nearly two-thirds of the world’s population expected to face water shortages by 2025, water scarcity presents a growing risk for businesses and communities around the world.”