Water, food and energy are strongly interconnected. In this study we address this issue taking the lens of financial concerns to investigate the WFE relationship. Specifically, the aim of our paper is to analyze the volatility spillovres between indexes representing the financial component of WFE nexus. We use a multivariate GARCH model with daily data from November 2001 to May 2013. Water is proxy by equity index that represents the performance of the industry involved in water business both at global and local level. For the food and energy sectors we use two sub-indexes of S&P GF-Commodity Index. Our results highlight the existences of a financial nexus between WFE that is particular exacerbated during 2008 crisis. Evidence therefore suggests the need to better investigate the policy options that can be used to reduce price volatility in a framework of a rising relevance of water issues within the nexus.

As much as seventy times more water is needed to grow food than for domestic use. Severely waterscarce countries such as Egypt do not have enough water to grow their own food and need to import food from elsewhere. Countries like the USA, Australia, China, India, Mexico and Turkey have made massive investments to build dams and develop irrigation systems. As a direct consequence, the famines predicted for India have not occurred and world food prices are lower than ever. But rivers are drying up, groundwater levels are falling dramatically, and water pollution is rampant near most Asian cities. All water that falls as rain serves a purpose in nature. If farmers don’t have an incentive to conserve water, over-use is the likely consequence and nature pays the price. Good government policy helps water move from lower to higher-value uses. Where water gets scarcer, agricultural use that generate only cents of value per cubic metre needs to shift to highervalue uses, or to return the water to nature. Research can help determine the value of water in alternative uses, even for nature. Agricultural research also works to increase the value of water in agriculture. A combination of smart engineering and agronomy can drive the water needed to produce a kilogram of rice down from 2000 to as little as 500 litres. To keep agriculture competitive and sustainable, a 50% increase in the value of water in agriculture will be necessary — and is feasible — worldwide over the next two decades.

Water is a key input for food production. It is used on farms to grow crops, raise livestock, clean processing equipment, generate electricity, and rinse produce. While water is important, available freshwater for human use is scarce. Much like other natural resources, freshwater is faced with supply and demand stresses, including population growth, climate change, and changing consumer preferences.