FIW is a passive ETF that tracks companies across the entire water industry value chain. It is not limited to utility companies: it also includes water-related technology, infrastructure, and filtration equipment manufacturers, capturing the growth potential of the sector.

It is suited to investors who want exposure to the structural growth in environmental protection and resource management, and who want to diversify their portfolios through a specific sector theme.

Launched in 2007 by First Trust, it is a passively managed (index-tracking) ETF.

From stocks listed on US exchanges, it selects the top 36 companies with a high share of water-related revenue, ranked by market capitalization. A tiered weighting method is applied so that small and mid-cap stocks are included alongside large caps, which prevents excessive concentration in any particular large-cap stock.

• A concentrated portfolio of 36 holdings
• A balanced allocation between the utilities and industrials sectors

Assets under management (AUM) stand at $1.8B, and the expense ratio is 0.50% per year.

It has a clear water industry theme, and thanks to its index construction method, it offers exposure to companies of various sizes while preserving the influence of its top holdings.

Supported by infrastructure investment legislation and rising demand for climate change response, the related sector has been drawing market attention. Whenever the importance of water resource management comes into focus, the ETF has also tended to show a steady upward trend.

In step with the ESG investing trend, capital continues to flow into environmentally themed assets. In a volatile market environment, defensive demand has also been observed for the water industry, which has strong real-asset characteristics.

It is built on a distinct theme of water scarcity and infrastructure demand, but investors should consider the volatility that comes with a concentrated portfolio of a few holdings, as well as the risk of the theme falling out of favor.

DRIV and KARS, shown in the table, focus on electric vehicles and future mobility, so they have different growth drivers from FIW, while AQWA is a similar ETF more focused on the water industry. Compared with these, FIW offers a stable portfolio backed by a longer track record. Other water-themed alternatives include PHO and CGW, and TBLU, which specializes in water technology, is also worth considering. If you want to widen your view to environmental infrastructure as a whole, GRID or the global clean energy themed ICLN can also be complementary choices.

FIW is a clear thematic play that invests in water, an essential resource for humanity. However, given the nature of thematic ETFs, it may be more volatile than general index products, so the following items should be checked in advance.

Demand in the water industry is expected to remain stable over the long term, but the theme's appeal could diminish if technological innovation or alternative resources emerge. In addition, because the fund is concentrated in specific sectors, it may move differently from the broader market.

It suits investors who want to invest in water scarcity, a challenge shared by all of humanity, while expecting both stable infrastructure returns and growth. It is one of the credible options when you want to allocate a portion of your portfolio to an environmental theme.