What would life look like without clean, reliable water?

What would life look like without clean, reliable water?

Water is the foundation of life, society, and the economy. In England and Wales, the water sector faces unprecedented challenges. Climate change, biodiversity loss, rising bills, and the threat of antimicrobial resistance are not distant risks. They are here, now, and urgent.

At Royal London Asset Management, we believe that responsible investment in the UK water sector is not just about financial returns. It is about safeguarding a resource that underpins everything.

Why we invest in water

Our commitment goes beyond stable returns. Water companies are at the centre of a complex balancing act. They must deliver on environmental promises, keep water affordable for everyone, and attract the investment needed to upgrade ageing infrastructure. This trilemma is tough, and it is getting tougher as expectations rise and regulations evolve.

As investors, we do not just provide capital. We set out clear expectations and work with water companies to drive real change. We expect them to:

• Lead on climate adaptation, biodiversity, affordability, and antimicrobial resistance
• Be transparent and accountable in everything they do
• Manage environmental, social, and governance risks with ambition
• Engage openly with regulators, customers, and communities

Developed in close collaboration with investor group leads, our two-year engagement programme highlights key progress, challenges, and investor expectations. We use these to assess progress, encourage best practice, and push for better outcomes across the sector. To date, our investment in the UK water sector spans both equity and credit asset classes and in this latest programme we have engaged with 11 water utility companies in England and Wales. Whether through shareholding or debt, our position gives us a powerful voice – one we use to advocate and influence for long-term, sustainable change.

Investor group collaboration

To enhance the investor voice, this programme was conducted in collaboration with asset owners:

We extend our gratitude to our investor group, including Pension Insurance Corporation, for their participation and support.

Details of the water companies and investor group engagement leads can be found on page 24 in the Appendix. The report reflects the views of Royal London Asset Management, developed through close collaboration with the investor group.

We have found this collaboration to be both constructive and insightful. The clear objectives within a robust framework, the strength of the underlying research and expert coordination by Royal London Asset Management have contributed to the success of this project. We are encouraged by the progress and the positive momentum among the companies we’ve engaged.

 Faith Ward MBE, CRIO, Brunel Pension Partnership

The four pillars of our engagement

Our approach is focused and collaborative. Together with other major investors, we created 19 investor expectations across four pillars. By joining forces, we amplified our voice, shared best practice, and drove more ambitious and credible change.

1. Climate change adaptation
   Extreme weather, floods, and droughts are testing our water systems like never before. We want to see companies investing in smart technology and nature-based solutions. Some are leading the way with artificial intelligence and predictive analytics. Others need to catch up.
2. Biodiversity
   Water companies are stewards of vast natural resources. Protecting and restoring these habitats is essential for resilient water supplies and thriving ecosystems. The sector is stepping up: biodiversity net gain, natural capital assessments, and ambitious habitat restoration are moving from aspiration to action. But to truly deliver for nature, companies must close the gaps, they need to build robust baseline data and report transparently on real-world outcomes.
3. Affordability
   Water is a basic human need. With bills rising and water poverty a real concern, companies must do more to support vulnerable customers. Social tariffs, hardship funds, and digital outreach are expanding, but disparities persist in how support is delivered and measured. Affordability must be built into every decision.
4. Antimicrobial resistance (AMR)
   AMR happens when bacteria become resistant to antibiotics, making infections harder to treat. Wastewater treatment plants can help slow the spread of AMR, but they also collect antibiotic residues and resistant bacteria from homes, hospitals, and farms.

Water companies are starting to respond by investing in advanced treatment technologies like ultraviolet light, ozone, and special filtration systems. They are also working with researchers to better understand the problem and are exploring nature-based solutions such as constructed wetlands. However, there is still a long way to go. The sector needs clearer rules, better monitoring, and more consistent action to tackle AMR effectively and protect public health.

A call to action for investors

We urge fellow investors to use these expectations as a blueprint for their own engagement. In our view, we need to hold water companies to account - demanding ambition, transparency, and action on the issues that matter most. By working together, we can ensure the water sector delivers lasting value for customers, communities, and the environment.

Our commitment: Investing and monitoring for the long term

Our work does not stop here. We will keep monitoring water companies, tracking progress on pollution, climate risks, and biodiversity. We remain committed to transparency, innovation, and collaboration.

Voting and engagements may not always apply to any specific Royal London Asset Management fund or strategy, as each will have different investment objectives. Please check your prospectus for details on specific product objectives.

Read more: 2025 Water Sector Engagement Report

For professional investors only.  This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. Reference to any security is for information purposes only and should not be considered a recommendation to buy or sell.

The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change. Forward looking statements are subject to certain risks and uncertainties. Actual outcomes may be materially different from those expressed or implied.