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EditorBank Vontobel AGMarketing Private Banking (M. Rose, R. Fäh)Gotthardstrasse 43, CH-8022 ZurichTelephone +41 (0)58 283 71 11

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blue 3

this sector will benefit from stable demand, similar to those in the utilities sector. Technologies that enable the efficient distribution and conservation of water are also interesting from an investor perspective.

“He knows the water best who has waded through it” is an old Danish proverb. On the following pages, you can intellectually wade through the theme of water. But take a break from your reading for a refreshing jump into the cold or warm water – in a lake, in the sea – during these warm summer months.

Cordially,

Zeno Staub, CEO of the Vontobel Group

Editorial

Dear readers,

The theme of this issue is water.

What does water have to do with money? It is interesting that, for the most important resource in the world, there is no world market price – contrast that with wheat or crude oil.

Nevertheless, water is intimately interwoven with the economic and financial world, like the intricate branches of a sewer sys-tem. One of the more interesting analyses on the current situation plots the budget of various EU countries against the performance of their public sector in general and in particular to the quality of their drinking water. It’s a convincing argument: every country that has any sense of pride in itself, and can afford, delivers high-quality water directly into its citizens’ homes. Carriage paid. The actual figures reveal a strong correlation: the lower the debt ratio, the higher the water quality.

In other words, water has a great deal to do with money. Without water, there would be no life in the economy, either. Need some examples? Coca-Cola uses 300 billion litres of water annually. Even broadly diversified food companies like Nestlé are placing strategic bets on drinking water, making major acquisitions in the sector. The chemical firms in Basel are not just coincidentally lo-cated near the river. And Swiss energy policy foresees more water in the future energy mix here, with billions being invested over the coming decades. For investors, water is therefore an important investment theme. Also for the Vontobel Group. Our company has made a name for itself investing in and around water, especially by the investment team specialised in sustainability. Read the article “Water – an es-sential for life and an investment idea” (page 32). Companies in

Would you also like to read “blue” on your iPad? To download the app, or get more information about it, visit www.vontobel.com/blue or go to the App Store directly.

4 blue

Content

20Clean water thanks to solar power.It would be so simple: Put PET bottles containing water in the sun, and six hours is enough to kill off all the danger-ous germs. A revolutionary discovery.

6The struggle for water.A water tour around the world.

12The blue miracle of Vienna.Vienna draws its drinking water from the Alps, even though river water is quite nearby. Why this is so is explained by the head of the Vienna Waterworks.

18Many facets of an element.Why do snowflakes always have six sides? Who consumes how much water, for what purpose? Facts on a special element.

Why is the ocean blue?The blue colour of the sea is caused by light falling on the water. Sunlight is composed of different colours; we can see them, for example, in a rainbow. Pure water has the special characteristic that it can absorb all colours – except blue. Instead of being absorbed, blue is reflected. And that is why pure water appears to be blue.

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23 Column: Mysterious water.Dr. Manuel Bachmann on the element of water.

28Macro: Following a promising start, markets take a cold shower.

32Opportunities: Water – essential for life, and an idea for investors.Water is an interesting investment idea.

36 The Vontobel Guide: Tips for going out.In each edition of “blue”, different Vontobel teams will present a selection of local highlights.

38 Book CornerThe Age of Less – Die neue Wohlstands-formel der westlichen Welt (“The new prosperity formula for the Western world”).

34 Blue Pages: News from the Vontobel Group.A compilation of news from all our busi-ness areas.

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24 Swimming on the wave of success.For Pascal Stöckli, lifesaving is a high performance sport. From a handiwork to saving human lives.

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1,385,984,610 cubic kilometres – that’s how much water there is on our

planet, in sea water, ice, snow, groundwater, rivers, lakes, the moisture in

clouds and fog. Enough for everyone, actually. But water is unequally dis-

tributed, and so are the problems that it creates. Join us on a water tour of

the world.

The struggle for water.Theme: Water

We turn on the tap and it just comes bubbling out. We turn it off and watch the last drops fall into the sink. Then down the drain and they’re gone. For most people in Europe, water is simply there. It flows, without a beginning and without an end, through pipes and channels, through lakes and rivers, through seas and skies. Some-thing so abundant is simply taken for granted. And once it’s taken for granted, we do not even think about it any more. People find it easy to overlook water, because it is so utterly unmarkable: odour-less, tasteless, colourless. A liquid, apparently, with no character?

Nothing could be further from the truth. Water may have a low profile, but unremarkable it is not. As researchers have found, water has more than 40 noteworthy properties that distinguish it from all other substances. For example, only water can be found in all three states in nature, and can change from solid to liquid and from liquid to gas. Water is also present in outer space, but here it is mostly frozen or a gas. The earth is the only known place in the solar system where water can be found in liquid, solid and gaseous states at the same time. Liquid water is a rarity in the universe, because water can exist in a liquid state only in a very narrow temperature range. No form of life on our planet – plants, animals or humans – could exist without liquid water. The earth without water would be lifeless and empty.

Water means life. For the earth, water has a similar function as does blood for human beings, dissolving chemical elements within it and transporting them far and wide. Water carries salt into the oceans, cleans the air, stabilises the climate, stores en-ergy and displaces it over thousands of kilometres, ensures that plants, animals and humans can live and survive, and promotes hygiene and health. Sometimes, however, it also promotes sick-ness, death and strife. Let us start our tour.

Australia: little water, high consumptionPerth is known as a green garden city in southwestern Austra-lia. About 1.8 million people live in its metropolitan area. The city skyline is impressive, with many high-rise buildings in glass and concrete. Five universities are located here. Perth is a rich city. The natural resources of Western Australia – coal, gold, tin, nickel, oil and gas – have made it rich. But Perth is also a poor city – poor in water. Australia has always been one of the world’s arid regions. Knowing that, one might assume that Australians are economical with the water available to them. Paradoxically, the opposite is true: on a per capita basis, water consumption in Australia is higher than the world average. And Perth consumes more per head of population than any other city in the country. If you drive through the city’s residential neighbourhoods, you can see why. Almost all the houses have large lawns, neat flower beds, shrubs and trees – all of which must be artificially watered. There are households in which 90 percent of the water they use seeps into the ground in their gardens or even evaporates into the air when the sprinklers are turned on.

Rainfall has always been meagre in Australia, but in the past few years, climate change has decreased it even further. Water lev-els in aquifers that have contained freshwater for up to 40,000 years have been falling faster and faster, with no new water to replenish them. Yet wastefulness when it comes to water has not declined, but rather the opposite: In Perth, over 150,000 wells

By Urs Thaler & Angela Obrist

In the Indian city of Kolkata, women and men fight their way forward to the

tank truck that has just brought fresh water to the slum.

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have been sunk without permits, as private citizens go drilling for water in their back yards. By doing so, suburbanites can secure direct access to groundwater needed to irrigate their lush green lawns and other garden plants.

Tim Flannery, a prominent Australian scientist and environ-mentalist, predicted that in the face of this absurdity, Perth will probably become the biggest ghost town in the world as its inhabitants will be forced to leave the city once the groundwater supply has been depleted. Pierre Horwitz, a professor of ecosystems at Perth’s Edith Cowan University, also believes that the city is over-exploiting the resource: “Currently we are depleting our groundwater,” says Horwitz, convinced that the smart thing to do would be to change people’s behaviour and get them to waste less water.

The alarm bells seem to have been noticed by Perth’s city au-thorities, at least. They have launched numerous projects to reduce waste and prevent the overuse of groundwater. So far, around 111 billion litres of wastewater per year have flown more or less directly from the kitchens of Perth into the Indian Ocean.

Now the city wants to keep this water in the freshwater hydro-logical cycle, pre-clean it and discharge it into the city’s lakes, from where some of it will seep into the deep groundwater and thus replenish the water supply in the aquifers.

In addition to relying on these natural cycles, Perth is also build-ing large seawater desalinisation plants. The first, which went

into operation in 2006, now provides 17 percent of the city’s drinking water. Two other large plants will start up this year, so soon more than half of Perth’s drinking water will come from the sea. Be-

cause Perth is a rich Australian city, it can afford expensive tech-nologies and expensive drinking water. Others cannot. Kolkata, for example.

Light and much darkness in IndiaCalcutta, or Kolkata, as they call the city today in Bengali, is one of the ten largest megacities in the world. Officially, Kol-kata counts 15.4 million inhabitants, but many observers come up with much higher numbers. The population is growing and growing, currently at the rate of about 4.1 percent a year. Every two years, in other words, Kolkata adds a city the size of Zurich

“When the groundwater runs out,

Perth will turn into a ghost town.”

Perth, Australia. The splendid green residential neighbourhoods with their blue

swimming pools attest to the prosperity of the city and its citizens. But there is

a flip side to all the private pools and lawns, bedecked with flowers, shrubbery

and trees: they bring about above-average water consumption of up to 600

litres per person per day.

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to its population. A key difference, however, is that in Kolkata, the population density is five and a half times what it is in Zurich or Berlin.

There is no lack of water in this city on the Hooghly River, a branch of the mouths of the Ganges. Per capita per day, around 130 litres of water are available to the population, almost exactly the same as in Vienna and other Western cities. And yet every-thing is different here. In Kolkata, the water in many parts of the city is dirty, contaminated, and undrinkable. Far too many things end up in the river that do not belong there: animal carcasses, unfiltered, toxic discharges from industrial plants, foecal matter and even deceased human beings, whose bodies are believed to be pure and are therefore not cremated but surrendered unto the river. In Indian rivers, in which people wash and fetch water to drink, up to 1.5 million coliform bacteria have been measured per centilitre of water. A permissible quantity would be 500.

In Kolkata, then, water often means death. V. S. Naipaul, winner of the Nobel Prize in Literature, is a writer with Indian roots who sees no future for the megacity. “All of its sufferings are suf-ferings of death,” he wrote. Even India’s former Prime Minister Rajiv Gandhi called it a dying city. Nor was the French economist and Council of State Erik Orsenna entirely at ease when he made

a stop in India while writing his book “The Future of Water.” He called Kolkata “the capital of cholera, a city you cannot enter without shivering in fear.” He visited the slums, where he saw how families of eight or nine were living together in a space of 12 to 15 square metres, and noted as well that the toilets were dangerously close to the water supply. Where there was piped-in water, he remarked, the supply was often interrupted for hours on end.

Because the city continues to grow, thanks to the unchecked migration of people from rural areas of India and neighbouring Bangladesh, the infrastructure in some parts of the city is perma-nently overloaded or simply non-existent. This anarchic growth creates a breeding ground for cholera and many other infectious diseases. The breeding places of disease will continue to thrive if Kolkata is not able to permanently separate its drinking water system from its sewage system.

Not everyone has written Kolkata off, however. Not everyone has allowed himself to be crushed by the dark side of this huge city. One of these people is the French writer Dominique Lapierre, who initiated a number of humanitarian projects in India many years ago and also worked closely with Mother Teresa. He wrote about his time in Kolkata, giving his book the provocative title

Kolkata, India. Three water scenes from this city of 15 million: Homeless men

openly wash themselves on the street. At a collection point, women come to

fetch water and slake their own thirst. Faithful Hindus carry out a traditional

ritual in the Hooghly River, the so-called “Tarpana”.

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“The City of Joy.” In this work, he wrote that he had found more love, compassion and happiness in the slums of that city than anywhere else in the world. It should not be dismissed that a majority of the population thinks the same. When Rajiv Gandhi called Kolkata a dying city, a wave of indignation ran through the city. People in Kolkata are well aware of the precarious-ness of their existence. But one thing they are not willing to re-linquish at any price is their pri-maeval vigour and the tough-ness it takes to get through all the crass challenges of their day-to-day lives.

Israel and Palestine – in permanent conflict over waterCrass challenges of every kind are also on offer in the Middle East. Egypt is a troubled country; Syria is currently wracked by violence. And between Israel and Palestine, there has been no peace for decades. In a region where so many conflicts are rife, it is not surprising that even the use of water is highly controver-sial. And this conflict may well become more aggravated as time goes on, because local water resources are in decline.

Israel currently consumes around 220 litres of water per capita per day, whilst a Palestinian, with 32 litres a day, consumes only one seventh as much water – an amount that is significantly below the minimum standard postulated by the WHO of 100 litres per person per day.

In Israel, however, it is not private households that account for the lion’s share of total consumption. Households consume only

40 percent of the water, whilst 53 percent flows into agriculture, where it is used incredibly efficiently, transported in just the right doses precisely to the right end of the plant, thanks to the lat-est drop-irrigation techniques. On the other hand, in Palestine, with its poor infrastructure, 60 percent of available water is lost

through leaks in the piping system. To make up for this shortage of water, Palestin-ians must subsequently buy water from special dealers at a high price.

Israel gets just under a third of its water from ground-

water in the West Bank. Another quarter comes from the Jordan River and Lake Kinneret, the old Sea of Galilee. Of increasing importance for Israel are high-performance desalinisation fa-cilities on the Mediterranean coast at Ashkelon. There are even plans for Israel to recuperate its entire drinking water through desalinisation plants, ending the over-exploitation of its ground-water. Yet these facilities have their critics as well. They require an enormous amount of energy to run. Each desalinisation plant needs its own power station – one that could provide enough electricity for a small city.

On his water tour through the Middle East, Erik Orsenna found that Israel was causing tensions and irreconcilable resentment, because it claimed a major part of the region’s water for itself. At the same time, however, he also praised the resourcefulness of the Israelis, who were more frugal with water than anyone else around the world. Israel, he wrote, is a leader in the reprocess-ing and utilisation of used water, and thanks to the fruit of its research work in this area, there is cause for hope for the world’s hundred countries suffering because their water is in short supply.

Incidentally, there are voices in Israel as well calling for greater fairness in the distribution of the country’s water. Booky Oren, the president of Israel’s water management umbrella organisa-tion, has said, “Water can be a tool for peace building. Water is not something that belongs to Israel. It belongs to the whole world.”

Book tipErik Orsenna, Die Zukunft des Wassers (“The Future of Water”, German only). dtv, 2012

“Water can be a tool for peace

building. Water belongs to the

whole world.”

1 Pumping station at Mekorot in southern Israel. Each year, Mekorot provides

Israel with 1.5 billion cubic metres of water – about 70 percent of the coun-

try’s total consumption.

2 Israel invented drip irrigation. This makes it possible to apply water ex-

tremely sparingly, as here in a settlement at Kiryat Gat.

3 Enormous seawater desalinisation facilities in Hadera on the Mediterranean

coast north of Tel Aviv. Facilities like this one aim to make Israel less depen-

dent on its scarce groundwater.

4 A Palestinian woman from Khan Younis in the Gaza Strip fills a bottle with

drinking water at a public water point.

5 Conflict over water. Palestinian women protest to Israeli border police

against displacing the irrigation system in the Israeli settlement of Kiryat

Arba near Hebron.

12 blue Theme

Vienna’s drinking water supply is very different from that of Paris, Berlin,

London or Zurich. The Viennese population does not drink water originat-

ing in a river or lake, and only seldom does it tap into its groundwater. No,

Vienna’s water is pure spring water from the Alps. Fresh, cool and sustain-

able since 1873.

The blue miracle of Vienna.Theme: Water

Interview: Urs Thaler // Photo: Sandro Diener

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Wolfgang Zerobin, head of the Vienna Waterworks, at the reservoir on the Rosenhügel.

14 blue Theme

waterworks was built on the Danube Canal, which transported additional bank-filtered river water into the city via the “Kaiser Ferdinand Main”. But the water quality was very bad, both from the private wells as well as from the Danube. This is not sur-prising, because in human-to-human circulation systems, water quality always suffers.

What do you mean by “human-to-human circulation systems”?In the water utility business, we speak of a “human-to-human circulation system” whenever – to put it a bit crassly – these people drink what those people eliminate. Because cities in the 19th century did not have sewage systems, nor any water mains to separate sewage from their water supply, pathogens continu-ously entered into their water circulation system. Both of these conditions were true of the private household wells, as well as water from the Danube. This would result in periodic epidemics of cholera and other diseases, which hit most European cities until the early 20th century. Vienna wanted to break out of this vicious circle.

And how did you do it?At that time, there was a young geologist and paleontologist at the university, Professor Eduard Suess. He had an ingenious plan – one that shows how far ahead of his time he was. He proposed to take clean spring water in the mountains of Lower Austria and transport it in closed adits, aqueducts, and canals to Vienna. As a geologist, he knew that if the route would be laid out optimally, then from a technical point of view, transport-ing the water would be feasible without needing a single pump. Thanks to the difference in altitude, gravity alone would be suf-ficient to ensure that, in a flow time of approximately 16 hours, water could be brought all the way from the mountains of the Rax and Schneeberg areas to Vienna.

When you think of Vienna, you think of the Danube. And yet this city, with its population of 1.7 million, doesn’t take its drinking water from the river right at its doorstep, but instead pipes it in from far away in the Alps. Dr. Zerobin, why does the Vienna Waterworks prefer a complicated solution to a simple one?I readily admit that technically and operationally, a lot of effort and expense is required to bring water from the Alps of Lower Austria and Styria over hundreds of kilometres to the capital. But, given that the First Spring Water Main has been operating for 139 years now, I can say from conviction that Vienna could not have a better and safer system.

What is it about the Vienna system that is so good?Compared to other systems around the world, the drinking wa-ter supply system here in Vienna stands up very well. Our system is sustainable; it provides us with clean water; there are no supply bottlenecks; and the price is cheaper than in many other large cities in Europe. Among the people of Vienna, there is probably no-one who would want to give up the fresh spring water we have and drink groundwater or water from the Danube instead.

Is there a reason for not using water from the Danube?Yes, our past experiences add up to a good reason not to do that. Up to the middle of the 19th century, supplying water to our city was always very precarious. Before 1870, there were about 11,000 private household wells in Vienna. The city had 326,000 inhabitants at that time. The amount of water avail-able per capita per day was just four to five litres. This is far below the quantity necessary to meet basic needs. To put that in perspective, today the people of Vienna, indeed most Europe-ans, consume around 130 litres per person per day in the home. So to alleviate the water shortage at that time, around 1841 a

The crystal clear Brunnsee lake is fed by Alpine water from the Hochschwab

mountains. Vienna’s spring water comes from the same headwaters.

Without using chemical additives, workers clean the cistern at Steinhof,

which supplies spring water to Ottakring and Hernals.

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Sounds fascinating. And was the plan implemented smoothly?No, the issue became a political hot potato. Doctors and hy-giene specialists were for the spring water solution, because they immediately recognised the enormous public health bene-fits. Technicians on the other hand preferred to bring water into the city from the nearby Danube by building better-performing waterworks on the river. When the Mayor at that time, An-dreas Zelinka, saw the geologist’s plans for the Spring Water Main, and realised that it would be almost 100 kilometres long, he cried out, “Suess, you're a fool!” But the Municipal Coun-cil of Vienna decided against the Mayor and approved the construction of the project, which for its time was a gigan-tic undertaking. Even Emperor Franz Joseph I got involved: He gave the Kaiserbrunn spring in the mountains of Lower Austria to the city, and in return he was able to preside at the inauguration – after only four years of construction – of the First Spring Water Main at the Hochstrahlbrunnen fountain at the Schwarzenbergplatz in Vienna.

Soon after the First Spring Water Main came on line, a second one was built – this one 180 kilometres long, twice as long as the first one.That’s right, because Vienna experienced what every city in the world goes through when it expands its infrastructure: After-ward, the city grows even faster. The excellent supply of clean drinking water became a selling point for the city back then. So after 1873, they began making plans to build a Second Spring Water Main. The Hochschwabgebiet in the province of Styria proved to be best-suited for it, and very productive as well. Ten

thousand construction workers built the Second Main, creating 100 aqueducts and numerous culverts that function as com-municating pipes without pumps. With the two Spring Water Mains, we also generate electricity in eleven hydroelectric power plants for the villages in the areas where the headwaters are located.

But that can’t be a very small area?No, quite the opposite. With an area of 675 square kilometres, it is one and a half times as large as the city of Vienna itself. A

significant part of it is owned by the city of Vienna and is well looked after and pro-tected by Forestry Commis-sion experts or by our em-ployees. The area around the headwaters is a protected

conservation zone. We pay careful attention to the flora and fauna, maintain the forests and ensure that the population of wild animals doesn’t become excessive. Although there are a few mountain huts for hikers and mountaineers, the area is for-tunately not overrun by tourists. It is important to us that even people hiking in the mountains won’t negatively affect the intact biological balance of the headwaters area. So we have even that firmly in hand. After all, the optimal purity of the spring water is worth a lot to the city of Vienna.

When consumers turn on the tap, is it possible for them to tell whether it is groundwater or spring water that is coming out of the faucet?Yes, absolutely. Our spring water comes out of the tap nice and cool – about seven or eight degrees Celsius – whilst the tempera-ture of groundwater is 14 degrees.

“We do not need to add any chemi-

cal agents to process the water.”

The water reservoir in Steinfeld is amongst the largest drinking water reser-

voirs in the world. It is comprised of four enormous chambers, each one with

288 columns. Filled to a depth of ten metres, the chambers can each hold

150,000 cubic metres of water.

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Is it true that the spring water is perfectly natural, untreated water?Basically this is true. As opposed to the way other cities treat their water, we do not need to add any chemical agents to pro-cess the water. It flows completely untreated to Vienna and could probably also be drunk in that state. But shortly before it reaches Vienna, a minimum amount of chlorine is added for the sake of security – an amount so insignificant that a consumer would never notice it. Water is considered to be a foodstuff in Austria, so it is subject to food legislation.

You must be quite convinced of the quality of Vienna’s drinking water to intervene so little.That negligible chlorination is enough for us, because we would rather invest more in quality control, security and surveillance of the entire external facilities and the headwaters area. We know what is happening in practically every square metre in the head-waters area. Where is it raining, where is it not? How many litres are flowing from which spring into the system? How strong is the turbidity? Where is the turbidity of the spring water so great – for example after a heavy rain – that we should let the water drain back into the natural stream or river bed, rather than use it as drinking water? Factors like these are being monitored by our people around the clock. They continuously check and evaluate the results from the various monitoring stations. We measure the water quality every two minutes in the headwaters area, as well as at 46 different points on its way to Vienna, and we have 40 meteorological stations. As a consequence of Chernobyl, we es-tablished additional control systems that immediately signal any radioactive contamination in the air or water. In such a case, we could switch over straightaway to the supply of uncontaminated groundwater.

So is Vienna's supply of drinking water assured with the Spring Water Mains?Yes, in principle, the two mains are completely sufficient. Thanks to them, we can provide 1.7 million people with fresh spring wa-ter which is of excellent quality and the envy of many other large cities. For security reasons, however, Vienna’s water supply rests on three pillars today: The First and Second Spring Water Mains, and in addition, access to groundwater. Normally we supply the whole city with spring water. But because the two mains are checked and serviced every year, they are out of service for a certain period. At that time, we feed groundwater into the sys-tem, drawing it from the water conservation area at Lobau and the waterworks in Moosbrunn, and we fall back on our 1.6 mil-lion cubic metres of stored spring water. These large reserves prevent Vienna from suffering from bottlenecks in supply even in the hottest summers.

For some time, we have been hearing about dire scenarios from climate scientists – also in view of water inventories. Could climate change threaten or even cripple Vienna’s water supply?No. European studies, as well as those we have conducted our-selves, show that we are in a fortunate position. The climate change that is taking place is not having any noticeable effect in the northern part of the Limestone Alps. The water inventories in our headwaters areas in Styria and Lower Austria are so large that they will always be sufficient for Vienna’s needs. The situation to the east and southeast of Vienna may look different. In the prov-ince of Burgenland, the consequences of climate change should already be felt in the water supply. The southern part of Romania may well have significant problems. In Vienna, however, we are living as if on a secure island, and will have enough water for the long term. For us, the most important challenge of climate change will be to maintain the vegetation in the headwaters area.

Like a water snake on the way to Vienna. The Leobersdorf Aqueduct, part of

the First Spring Water Main.

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What is your personal relationship to water?Already as a child I was interested in water. But that does not mean much, as every child loves to dam up streams and finds cool, wet water fascinating. So it took more than that for water to become the central focus of my life. In my case, it was some-thing like an inherited predisposition: One of my grandfathers was a hydraulic engineer. However, he dealt with surface water and built bridges. And then there was my father, who said to his three sons: “One of you has to be a doctor, one a lawyer and one an engineer.”

And you were probably the youngest, who then had to become the engineer?No, I’m the second son. But the funny thing is that all three of us did choose the professions our father wanted.

So it was no coincidence but a conscious decision – even if it was your father’s instead of yours?No, wrong again. When I finished my Matura – my A-levels – in Linz, my father said to me, “Now you go to Vienna, you take a look at the universities, study the course catalogues and choose a major.” So off I went to Vienna with a friend. We explored the big city of Vienna and for half a week, we lived it up. Never even turned up at the universities. Only on the last day did it occur to me that I had better return home with a course catalogue. Because the University of Natural Resources and Life Sciences happened to be the closest, I fetched a directory there, flipped through it quickly and then told my father, “Yes, I want to do technical studies like this.” My decision was totally unfounded; it was just a question of chance – and yet it turns out to have been a very good choice, one that I have never regretted.

And how was it that you later came to the Vienna Waterworks?During my studies in environmental engineering and water man-agement, I got involved with the quality of drinking water and wastewater. After that I spent four years as a teaching assis-tant and wrote my dissertation. In almost everything I was do-ing then at the university, the theme of water kept appearing. Eventually I got the urge to move from theory to practice. There were two main opportunities for doing that: I could go work for the Vienna Waterworks or for a big company with projects in research and development. Coincidentally, in 1986 there was a position free at the Vienna Waterworks that interested me. After joining, I rotated through planning, water production and operations monitoring. In almost every function, I felt like I had the best job in the world. That's why, two years ago, when the top management position of the Vienna Waterworks became vacant, I didn’t even want to apply. But then when many of my colleagues urged me to put my name forward, I took the plunge right before the closing date – and was selected for the job. Ever since then, I know that I definitely do have the best job in the world.

Dipl.-Ing. Dr. Wolfgang Zerobin (56) is a Senate Councillor of the City of Vienna and Chief Executive Officer of the Vienna Waterworks, which is also called Municipal Department 31. Zerobin studied environmental engineering and water manage-ment at the University of Natural Resources and Life Sciences in Vienna. After several years in academia, he joined the Vienna Waterworks in 1986, where he worked in different areas, before assuming overall responsibility in 2010. The Vienna Waterworks employs about 600 people.www.wienwasser.at

An eclectic polymath, Prof. Eduard Suess (1831–1914) brought science and politics together. In addition to conceiving and plan-ning Vienna’s First Spring Water Main, the geologist also worked on regulating the course of the Danube and the construction of the Suez Canal.

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Additional images and a video on the Vienna Waterworks.

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16,000 litres

22% Industry

8% Private households

is the size of a snowflake when it is first formed. In order for snow crystals to form, the temperature in the clouds must be between –4 and –20 degrees Celsius. These tiny structures spend the first leg of their journey earthward inside the clouds in which they are formed, where ice crystals attach themselves to the flake. In spite of the myriad shapes they take, all snowflakes have one thing in common: they are hexagonal. Scientists have demonstrated that this is due to water’s molecular structure.

of the human body is water– as is true of all vertebrates living on land. Losing even 10% of this water is lethal. Some algae consist of up to 98% water; a few invertebrates can survive a loss of 85% of the water in their bodies.

of the world’s fresh water consumptiongoes toward agricultural irrigation. 22% is used in industry, and only 8% by private households.

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600 litres

of the drinking water in the Dominican Republic is consumed as bottled water – which is now the primary source of drinking water for large parts of the world’s population.

of water per dayare enjoyed by the average inhabitant of an American city with a population of more than one million. In comparison, water con-sumption per person per day in Switzerland is 260 litres, whilst in India it is 25 litres.

13 l1 tomato

3,000 l 1 kg of wheat

140 la cup of coffee

120 la glass of wine

75 la glass of beer

16,000 litresof water for 1 kg of beef– that is the impressive quantity of water required for the produc-tion of this quotidian item of food. A product’s so-called “water footprint” measures how much water is consumed to produce it. In the case of food, this includes the water needed by plants while growing, the water used in the production and packaging processes, and the water that is polluted along the way.

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Millions of people lack access to clean water. The recipe to fix this would

be amazingly simple: Put the water in bottles and lay them out in the sun

for six hours – and the water is disinfected. Regula Meierhofer is commit-

ted to getting this Sodis method adopted in developing countries.

Clean water thanks to solar power.Theme: Water

“Today, I see water as already more valuable than oil – at least for human life. I don’t dare guess how high the price could go,” smiles Regula Meierhofer. Eawag, the water research institute where she works, is part of the Swiss Federal Institute of Tech-nology (ETH) focused on water and sanitation in developing countries. Here she is responsible for Sodis, a project which has brought her into the centre of the global discussion about the right to water – a subject that is being vehemently debated as the UN’s International Year of Water Cooperation approaches in 2013.

From Ms. Meierhofer’s point of view, human health is para-mount. An environmental scientist with a degree in environmen-tal hygiene, she states, “It is a fundamental concern that people be able to lead a healthy life in a healthy environment. Water is a key part of this equation.” This was why she came to Eawag, to support the development of Sodis and the distribution of the method in developing countries.

Simple principle, huge impact“Sodis is a very simple way to disinfect water and make it drink-able,” says Ms. Meierhofer. “You merely need to put the water in PET bottles in the sun. Six hours is enough time to kill off all the diarrhoea-causing agents in the water.”

The fact that the sun has a disinfecting effect has been known for a long time. For example, in Sri Lanka wells are generally kept open, and in Africa, after washing the dishes they are put in the sun to dry. Scientific proof of the sun’s effect was obtained only by the work of Lebanese microbiologist Aftim Accra, who, during the civil war in Lebanon which raged from 1970 to 1990, filled water in PET bottles every day because the water supply was constantly being interrupted. He placed the full bottles in the sun on his balcony. As a microbiologist, he was naturally

By Gregor Ingold // Photo: Sandro Diener

interested to see whether the water quality would get better or worse. After the first attempts, he found that the quality of water improved the longer he exposed it to the sun.

Eawag became aware of this principle of preparing drinking wa-ter and undertook various microbiological tests themselves, ex-perimenting with different vessels as well as the length of time the water would be irradiated by sunlight, to see what exact-ly was needed to kill the diarrhoeal agents. “We found that it worked,” says Ms. Meierhofer. In a further step, the researchers at Eawag decided to transfer this knowledge from the laborato-ries of Dübendorf and make it accessible to people in developing countries.

That was the moment the Sodis project was born – the acronym standing for Solar Water Disinfection. “We quickly recognised the tremendous potential of this simple method of disinfecting water,” says Ms. Meierhofer. “For many people in developing countries, right up to the present, getting clean drinking water every day is only possible with great effort.”

Traditions as a hindranceImplementing its first projects at remote locations, the Sodis team encountered some unexpected obstacles. Frequently they found that the local people were not even aware of the impor-tance of clean water for health. It was therefore first necessary to

Regula Meierhofer works at Eawag, the water research institute of the ETH, in the area of water and sanitation in developing countries. In addition, she is the director of Sodis, which is rooted in an Eawag commitment.

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change behaviours that had gone unchallenged for generations. “In the developing world, diarrhoea is part of everyday life for many people,” Ms. Meierhofer explains. “They hardly recognise the dangers arising from diarrhoea.” This is still the case even though stomach and intestinal diseases are especially life threat-ening for children. Worldwide, diarrhoea is the second leading cause of death among children under five, and diarrhoeal disea-ses kill about 4,000 people a day. The successful dissemination of the Sodis project is critically dependent on cooperation with established local charities and government organisations. Intervention is required at many dif-ferent levels. In addition, the activities have to be repeated over a certain period of time until they become part of people’s daily routine. One important way for this to happen is through direct contact with the population by promoters, as well as the possibi-lity to demonstrate some kind of official acceptance, for example, with a government stamp or by the participation of officials during presentations.

In the Carrière slum of Yaoundé, the capital of Cameroon, Zebazé Toguet

makes sure that his grandson is able to drink clean water on a regular basis.

Access to PET bottles is criticalAn important factor for Sodis is access to PET bottles. In various villages in a former project area in Indonesia, for example, the local health centres maintain a continuous supply of PET bottles, selling them at a competitive price. Not surprisingly, the method has al-ready been operating successfully there for seven years. In other villages in the same project area where no one looks after the sup-ply of bottles, the system broke down again after its introduction.

Nevertheless, Sodis’ success is evident. In more than 80 projects in over 30 countries, the method has been introduced, and more than ten million people have been trained to date. “We calculate that about 40 percent of the people trained will put it to use in a sustainable way in their day-to-day life,” says Regula Meier-hofer. Cases of diarrhoea and other serious diseases caused by consumption of contaminated water were effectively reduced.

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Sodis – clean drinking water in six hoursSodis is a simple procedure for disinfecting drinking water. Con-taminated water is poured into transparent PET or glass bottles and placed in the sun for six hours. During this time, the UV rays of the sun kill all the germs that cause diarrhoea. Thanks to Sodis, people in developing countries can have access to safe drinking water and thus improve their long-term health pros-pects. UN Water, the water coordination site of the United Na-tions, annually bestows its Water for Life Award on outstanding projects in the field of water management and public relations. This year, first prize in the category “best participatory, commu-nication, awareness-raising and education practices” went to a project run by the Fundación Sodis in Bolivia.

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Dr. phil. Manuel Bachmann is a Lecturer and the Head of Studies of the Executive Master’s Programme “Philosophy and Management” at the University of Lucerne, as well as an Instructor at the University of St. Gall. He publishes a monthly e-magazine for decision-makers called “absolutum”.

Mysterious water.

Column: Dr. phil. Manuel Bachmann

The astronauts on the first moon shot in 1969 “splashed down” on their re-turn to earth, i.e. landed on the surface of the ocean. This unprecedented suc-cess of German rocket technology was widely celebrated, but no one seemed to take note of the symbolic dimension of this final phase of the moon flight, namely that human beings had physi-cally set foot on a foreign celestial body for the very first time, but upon their return home it was not ground they found beneath their feet, but water.

That doesn’t seem particularly remark-able, insofar as water no longer has anything to do with our self-image as it did in earlier times. For us, water is merely a chemical compound, scientifically comprehensible and economi-cally utilisable – a substance and a resource, like so many others.

However, if – beyond these facts – water does still have any significance, then perhaps it is as when it takes the form of eau de cologne, or the water that fills our eyes as tears, betraying our feelings, or the luminous blue wave that one surfs on to prove to the world what kind of lifestyle he leads. The many areas in which “water” currently has some meaning illuminates the historic rupture in the way mankind sees him-self. In earlier times, water was of greater importance in our understanding of our nature and destiny. Together with fire, air and earth, water belonged to the cosmic elements. It was through these elements that mankind reflected the universe in himself. Water brought world epochs to an end; it symbolised the infinite; it was at the origin of the world. The battle of the sexes has been attributed to the contrast between man (fire) and woman (water). To increase one’s knowledge in art and science, a state of melancholy was thought to be required – something that had to do with having a high proportion of spiritual water. As a religious category, water meant the water of life, allowing an inner cleansing.

Of these once deep and mysterious ways water held our imag-ination, today our language is only full of metaphors such as “under water with work”, “that’s all water under the bridge”, or “he’s in hot water”. Do we still understand such phrases?

drinking water. “I find it very rewarding when you can do something that improves the living conditions of other people,” she says. Working in developing countries is near and dear to her. “After my education, I worked for three years on a develop-ment project in Nepal,” she says. “That’s where I experienced first-hand how difficult the conditions are that some people have to live under.”

Unlike us. Just to have the secure water supply we do in Switzer-land is an enormous privilege. “Every sip of clean water straight from the tap is basically an incredible luxury that we are not even aware of,” she says. “Even the water that bubbles up from springs and wells is always clean and high quality here.” People in other countries, however, are confronted with a very different reality. So even here in Switzerland, Ms. Meierhofer consciously takes care of the amount of water she uses.

Clean water – higher productivityThe Sodis director considers it correct that the UN has declared access to water as a human right. She is convinced that this right will give people in developing countries greater influence to im-prove their situation. Internationally, it is also a means for apply-ing pressure to governments that do not undertake enough to allow access to water, or to improve water quality.

Regula Meierhofer is convinced that Sodis is making an impor-tant contribution in the global fight for clean water. If so, the in-direct impact can be even more enormous, as clean water always sets in motion a developmental process, with the poor improving their health, children going to school and adults often improving their workplace productivity. Clean water is good for everyone. Sodis is, too.

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Water may be a fluid element, but in the life of Pascal Stöckli, it occupies

a very solid position. He is a lifesaver – not a professional lifeguard, but a

high-performance athlete. Training, competition, victory, rescue and relax-

ation – for this internationally successful native of central Switzerland, all

these activities take place in the cool wetness of water.

Swimmer on the wave of success.

Theme: Water

By Angela Obrist // Photos: Sandro Diener

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“As a kid, I was always in the water – I would stay in until my lips turned blue and my mother had to haul me back onto dry land,” says Pascal Stöckli. To this very day, the element of water has continued to hold for him the same magical force of attrac-tion. At the age of 16, Stöckli completed his training as a life-guard in the SLRG, the Swiss Lifesaving Society. It was through friends that he first learned about lifesaving as a sport and took part in his first competitions. “It goes without saying that I’m fascinated by the competitive angle, being pitted against other athletes,” he says. “But for me, it’s also valuable that with all the know-how I’ve gained through this sport, I could actually save someone’s life in an emergency. Lifesaving is a humanitar-ian sport.”

Today Stöckli participates in the discipline of lifesaving primarily as a competitive athlete. In addition to his athletic involvement, he is a career officer in the Swiss army, after having successfully completed his university studies in political science. Together, his interesting profession and his involvement in performance sports ensure that the engagement calendar of this energetic 30-year-old is always filled. “Lifesaving is the perfect sport for me,” says Stöckli: “It’s a water sport, and it constantly generates new challenges, thanks to its diversity.” In addition to swimming, his grueling training regime includes kayaking, board paddling, jog-ging, strength training and also rescue work using dummies. To be a lifeguard means becoming a generalist more than special-ising in a single discipline, Stöckli explains. Perhaps the closest comparison is to the versatility of the triathlon.

Like a Swiss “Schwingfest”Despite the impressive diversity of lifesaving, it remains rela-tively unknown in Switzerland as a sport. The approximately one thousand people taking part in the Swiss championships are mostly dedicated amateur athletes. In other countries, however, it has a significantly higher profile.

In Italy, for example, lifesavers belong to the Carabinieri, and in Germany they are athlete-soldiers who train all day and receive government support and encouragement. In Australia, lifesaving

Pascal Stöckli (30) has been Swiss champion eleven times, Eu-ropean and world champion twice, and holds a world lifesaving record. He studied political science at the Swiss Federal Institute of Technology (ETH) in Zurich and in addition to his athletic in-volvement is active as a career officer in the Swiss Army, cur-rently holding the rank of captain. More on Pascal Stöckli and lifesaving can be found at www.lifesaving.ch.

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is even the national sport, and enjoys the high-profile public per-ception that goes with that. Recalling his lifesaving experiences Down Under, Stöckli explains that “Australian competitions can best be compared with a Swiss Schwingfest” – our country’s traditional sport of “federal wrestling.” Lifesaving competitions in Australia are huge events, with around 7,000 athletes taking part, more than 20,000 spectators watching the spectacle, and the competitive “arena” stretching for a good three kilometres along the beach. To be sure, it’s all carried live on TV, too.

Lifesaving in an emergency“To learn from the best,” in 2002 Stöckli travelled to Australia, spending three months focussed on the open water, i.e. lifesaving in the sea. “The environmental conditions outdoors in nature are always changing, always making for excitement,” he says. And although as a lifeguard, one may primarily be an athlete, time and again one finds oneself in situations where the know-how you’ve learnt can be applied in real life. When training on the lake, Stöckli is often able to recognise that someone in the water is on the edge of exhaustion – an awareness that the average swimmer may simply not have. “Of course I always offer to help in those situations. Most swimmers respond, ‘It’s OK, I’m fine’. But you can often see that that is not the case,” he says. In those situations the athlete then brings the swimmers back to shore.

Whether it was a perfectly fit swimmer suffering a cramp in his calf muscle, some Australian children who were being pulled out by a strong undertow, or a surfer in France who took a nasty spill and hit his head on his surfboard – there have been several critical situations in which the lifeguard was on hand to come to the aid of people in distress. Even so, “hero” is a label he is quick to reject. “For me, it’s absolutely natural that I would use my know-how to help people in difficult situations,” Stöckli insists.

As opposed to the dramatic rescues depicted in Hollywood pro-ductions, in reality lifeguards often rescue people before they need help, for example, before they are even aware that they are swimming against a current that would completely exhaust them. For this reason, the way people who have just been res-cued express their gratitude can range quite widely. Whilst some people are extremely relieved to have been saved, for others, being rescued is an embarrassment, and once back on shore they walk away without a word. Stoeckli says, “You can’t take that personally, since the job of a lifeguard is perfect only if an acutely life threatening situation never comes up in the first place.”

An element of unpredictabilityA lifeguard must be absolutely physically fit. “Regardless of whether it’s a lifesaving competition or an actual emergency, you have very little time and have to be fully focused, from zero to a hundred, to do your job.” Mentally, it’s also important to keep a cool head when things get hectic. “You have to deal with very quickly changing conditions,” says Stöckli. “The sea may be perfectly calm in the qualifying heats of a competition, but

then it will surprise you with two-metre waves for the finals the same afternoon.” Despite the unpredictability of the element, he has fortunately never had a negative experience in the water: “I associate so many positive feelings with water. If I'm in the sea, surfing on a big wave and it carries me forward, that is always a fantastic moment for me.”

Training effort rewardedLifesaving is both diverse and energy-sapping. It demands a lot from the athletes who practise the sport. That is why, in the summer, the young Swiss puts in up to three hours of training a day, and even more before competitions. This training is paying off: Pascal Stöckli, together with one of his teammates, took the gold medal at the 2010 World Championships, leaving German athlete-soldiers, Italian Carabinieri and the famous Australian lifeguards behind. In the “line throw” event, a lifeguard throws a rescue line to his teammate twelve metres away in the pool, and pulls him out as quickly as possible. “Shortly after the event, we realised that we had not only won, but we had also set a new world record!” says Stöckli, recalling the greatest triumph of his career so far.

Despite his years as a lifeguard and his many intensive encoun-ters with the liquid element, water has remained a magnetic force in the everyday life of Pascal Stöckli. “Water exudes an incredible peace for me,” he explains. “After a hard day, to be able to gaze out on the lake – I find that the very best way to unwind.” It’s obvious that for Pascal Stöckli, water is, and will remain, a thoroughly magical element.

Lifeguards in SwitzerlandWater can be dangerous: in 2011, forty people drowned in Swit-zerland. A majority of these fatal incidents occurred in lakes and rivers, far from supervised swimming pools. In contrast to other countries, there are no full-time lifeguards in Switzerland. In local swimming pools, the so-called “Bademeister” are the authorised supervisors, but although they usually have had comprehensive training as lifeguards by the Swiss Lifesaving Society (SLRG), they are usually also responsible for other tasks around the pool as well. The SLRG has been in existence for more than 75 years, protecting and rescuing human lives in and around the water. Each year the society trains up to 7,000 lifeguards, organises various training courses for young people, and draws attention to the dangers of water through various prevention campaigns. In the turbulent summer period, SLRG members also help out as auxiliary lifeguards at swimming pools throughout the country.www.slrg.ch

More on your iPad

Additional images and a video on “Arena Rescue 2012”, one

of the biggest lifesaving competitions.

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Following a promising start, markets take a cold shower.

Macro:

Political tensions in the European Monetary Union (EMU) have significantly worsened during the spring. Yet the risk of the Euro zone breaking up could be just the wake-up call that is needed if a lasting political solution to the Euro crisis is to be found. In the USA, the economic outlook remains positive, and the emerging economies also are likely to soon regain economic momentum. In this environment, high-yield corporate bonds offer an attrac-tive supplement to traditional government bonds.

Political high tensionWith the election victory of François Hollande in France in early May and the stalemate after the Greek elections, political pres-sures have begun to mount. Equity markets in the Euro zone dipped below the level of the beginning of the year. At the same time, interest rates rose in the countries of the so-called Euro-pe-riphery, whilst in the “safe” countries such as Germany, the USA and Switzerland, they fell. After the victory of the Socialists in the French parliamentary elections, Germany will have to make concessions in order to cooperate with France. The focus will shift away from government austerity policies towards generat-ing growth – a move that is in fact stipulated as part of the Eu-ropean fiscal pact in the event of an economic downturn. With greater flexibility to consolidate public finances in difficult times, the vicious circle of forced austerity and worsening recession can at least be broken. The fiscal pact targets a cyclically adjusted deficit. For that reason, in the event of a deterioration of the prospect for growth, the budget does not have to be re-jiggered.

By Christophe Bernard, Chief Strategist, and Dr. Walter Metzler, Senior Investment Advisor

In the first elections in Greece, 70% of the population voted against the austerity measures associated with the international aid programme. With the elections in mid-June, the Nea Dimokra-tia party (ND) and the socialists (PASOK) won a majority, taking 162 of the 300 total seats in the Greek parliament. In principle both parties support the austerity programme, which is part of the support package of the European Union and the International Monetary Fund. A Greek withdrawal is therefore highly unlikely.

Europe facing fundamental decisionsIf a country wants to leave the European Monetary Union, the only way this is possible is by quitting the European Union itself. Therefore, by reintroducing the drachma, Greece would be tak-ing an extreme risk of isolating the country – a risk that any gov-ernment able to make the necessary economic calculations would shy away from. Beyond this, its Euro partners want to avoid that the other members could succumb to an uncontrollable conta-gion. Add to this the fact that the EMU has always been primarily a political project, with its core countries willing to take on very high costs themselves in order to assure that the project is saved.

A strengthening of the EU’s integration – i.e. an actual fiscal union – is politically out of the question for the moment, as is the introduction of Euro bonds with undefined maturities to cover the total government funding required. A true fiscal union would require a central entity granted, at a minimum, federal authority to shape key domains such as fiscal and social policy. Time-un-

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Christophe Bernard is the Chief strategist of the Vontobel Group and chairs

the Investment Committee.

limited money transfers from the economically strong countries to the less successful countries would thus also be possible.

One means of preserving the Euro zone without additional centralisation would be to establish a European Debt Fund, as proposed by the German Advisory Council. Here, the debts of all the Euro countries exceeding 60% of GNP would be jointly guaranteed. In return, the countries would commit to paying off this part of their debt over a period of 25 years. Such a solution would also be a commitment to a shared responsibility for the European debt problem – one which would involve from the outset not only the debtors but the creditors as well.

Adapting two sides in the EMUThe external economic imbalances between the countries in the Euro zone will not be eliminated within a few years, either. Up to now, much of the discussions have centred on the need for

adjustments in the countries of the Euro periphery. Easily forgot-ten was the fact that economically strong countries like Germany can make a significant contribution. In the EMU core countries, a strong economy leads to higher inflation than in countries needing major austerity measures. This reduces any advantages that the current economic paragons enjoy owing to their com-petitiveness in the price arena. In addition, stronger growth in the EMU core results in increased demand for imports, which also contributes to improving the balance of payments of the peripheral countries. However, it is often years before any sig-nificant results of economic processes like this are visible. With the change of power in France, at least the political will has in-creased to accept longer adjustment periods. But whether the financial markets can adjust remains an open question.

Economy: nothing to write home aboutThe economic picture in the United States looks considerably better than the one in Euroland, both in terms of current de-velopment as well as the outlook for the future. Industry is en-joying a robust recovery, carried by booming sales of new cars. Consumer spending is on the rise, posting solid, albeit moderate growth rates. In addition, there are increasing signs that the pri-vate housing market has reached a turning point. This broadens the base for economic growth, which will reach just over 2% in 2012. In the EMU, on the other hand, the worsening mood sug-gests that recovery will be further delayed. This means 2012 will result in a slight contraction. Switzerland, with growth estimated to be a bit under 1%, is situated between America’s growth rate and Europe’s. Swiss consumer sentiment remains somewhat gloomy, but in spite of that, consumers are still spending. Car sales in Switzerland, for example, are near an all-time high. In the emerging markets, the economic outlook is fairly posi-tive, yet still restrained for the moment. The easing of credit and

US housing starts and residential construction investments on the increaseChange over the previous year in %30

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monetary policy in China, India and Brazil is likely to lead to stronger growth in these countries again. Especially in China, however, several indicators point to the possibility of a disap-pointing economic performance ahead.

Focus on risk controlThe modest economic outlook, as well as the increased politi-cal risks, suggest that in the case of equities, investors should continue to proceed with caution. For fixed-income investments, which for most investors make up the lion's share of their port-folio, the traditional government bonds issued by developed countries appear unattractive. The ongoing tensions in the Euro zone are likely to be reflected in the continued low returns gen-erated by “safe” government bonds issued by countries such as Germany, Switzerland or the United States. In addition, in the medium term there is a risk that the historically very low interest rates will normalise, which would result in capital losses.

Government bonds issued by the peripheral Euro zone coun-tries such as Spain and Portugal generate high current interest. Any worsening of the Euro crisis, however, could lead to further increases in interest rates and with them, lower prices on the bonds already issued. The traditional bonds of the industrialised countries thus do not offer interesting an attractive outlook.

In the fixed-income domain, risk-conscious investors therefore need to reorientate themselves. Here, there are two possibilities to increase the potential of a traditional bond portfolio to gener-ate return with acceptable risks. On the one hand are govern-ment bonds issued by emerging-market countries; on the other are high-yield corporate bonds.

Government bonds issued by emerging markets offer consider-ably higher returns compared to the government bonds of de-veloped countries, which enjoy better economic fundamentals in many ways. Especially when it comes to public debt, emerg-ing economies perform significantly better than the developed countries, and in terms of economic and political stability, they have become much more “Western”.

High-yield bonds as an attractive additionHigh-yield corporate bonds also generate much higher current returns than traditional government bonds (see box). The de-fault risk is relatively high; rating agencies classify such bonds as speculative. However, the actual default rates on high yield bonds are currently close to historical lows. Accordingly, the current high spreads over US government bonds offer a com-fortable safety margin, which translates to adequate protection even if the US economy were to slide back into recession. In our main scenario, however, economic recovery will continue in the United States. Because of this, there is a chance that the interest rate spread of newly issued high-yield securities over govern-ment bonds will be narrower, and this would make the existing bonds even more attractive.

High-yield corporate bonds: higher returns with manage-able riskHigh-yield bonds are issued by companies with a relatively low credit rating. Specifically, this means that these compa-nies have a credit rating that is below the “investment grade” threshold (which corresponds to a rating of “Baa3” from the rating agency Moody’s or “BBB–” from Standard & Poor’s).

Because of the higher risk of default, the issuers of high-yield bonds pay a higher coupon i.e. interest rate. The return that an investor earns with such a corporate bond, therefore, is usually much higher than with a government bond with simi-lar maturity. This additional return is called the “spread” or “risk premium”. In general, high returns generate a thicker buffer against inflationary losses. In a balanced portfolio, for example, high-yield bonds play the role of return drivers. Government bonds play the role of risk buffers. The market for corporate bonds comprises a broad range of issuers, industries and rating categories. The largest selection of high-yield bonds is in the United States. Today, unlike in 2008, many corporate balance sheets are very healthy. This reduces the risk of default and makes this asset class more at-tractive to investors. For these reasons, in mid-June Vontobel launched an investment fund orientated specifically toward high-yield corporate bonds.

blue Macro 31

32 blue Opportunities

Water: an essential for life, and an idea for investors.

Opportunities:

Water is the basis of all life. Without this element, neither hu-mans, animals nor plants could survive. Water is also of inter-est to investors – for example in the form of companies that make possible the efficient use of freshwater.

For humankind, water is crucial in terms of three things: nutri-tion, health and industrial growth. From a global perspective, agriculture accounts for the greatest consumption of water, al-though this mainly holds true in countries with low to moderate GDP. In countries with higher national income, the largest con-sumer of water is industry. Because of population growth and increasing prosperity, global demand for fresh water is steadily increasing. During the 20th century, global population increased about threefold, but water consumption rose six times.

From the point of view of supply, for the foreseeable future there is enough water. The problem lies in the unequal distribution of resources. China, for example, has 21% of the world's popula-tion, but only 7% of its renewable water supplies. Such imbal-ances are already causing serious supply problems today, partly because of investment bottlenecks. This means that the condi-tions are ripe for water to provide good long-term investment and return opportunities.

Demographics and industrialisation are driving demandDemography and industrialisation are the critically important factors when it comes to consumption of water. These two trends often develop very dynamically, especially in those re-gions that are already struggling with scarce water resources, i.e. in emerging-market countries. The United Nations is expecting a world population of 9.3 billion people by 2050 – the current fig-ure is approximately 7.2 billion. On a global level, the challenges include infrastructure that is obsolete – or in some instances non-existant. For example, the Chinese government is investing con-siderable sums in water projects such as wastewater treatment and desalinisation.

About 70 percent of the world’s freshwater consumption is ac-counted for by the agricultural sector, whereas industry con-sumes 20 percent and the private sector about 10 percent. Major differences also exist in terms of geography – both as concerns demand as well as supply. In many parts of the world, climate plays a major role. For example climatic cycles bring about a reduction in rainfall or snowfall, or cause glaciers to recede, de-

By Roger Merz, Portfolio Manager

creasing the volume of new freshwater available. In tropical re-gions, on the other hand, the increasing frequency of flooding means that the local groundwater becomes contaminated.

Another problem is the level of pollution in the emerging mar-ket countries, particularly in their major cities. The World Health Organisation estimates that globally, only 5 percent of all waste-water is treated. Added to that is the fact that water used in agriculture also contaminates the groundwater, mainly through the use of fertilisers.

Scrutinising companies operating in the water sectorThe current economic and financial crisis has slowed down in-vestments and delayed large (water) infrastructure projects. This has led to a significant increase in the pressure on governments and industry with respect to investment in water projects. Ac-cording to a study by the US bank Citigroup, the investment vol-ume in the global water sector in 2011 amounted to around 450 billion US dollars. According to the study, in the future growth is expected to amount to 4 to 6 percent per year.

Investing in water means examining water’s entire value creation chain. This includes the sectors (water) infrastructure, transport and treatment, efficiency of water utilisation, agricultural irriga-tion, industrial processes, desalinisation and drinking water, in-cluding bottled water. Water as an investment theme is slightly defensive, meaning that companies operating in this sector are subject to relatively little fluctuation in demand – it is compa-rable to the utilities sector. From an investor's perspective, tech-nologies enabling the efficient distribution and conservation of water are particularly interesting. Specifically, this includes water filtration, desalinisation facilities, metre installations and new ir-rigation technologies for the agricultural sector. Before making an investment, however, a close look at the target companies is advisable. Companies with a focus on water treatment technolo-gies, for example, usually have relatively high valuations.

Growing market, takeover fantasiesDemography and industrialisation are likely to remain crucial to the demand for water over the long term. In this context, oppor-tunities will arise to profit by “filtering” quality companies with high potential for strong growth in the industrial sector. Since many of these companies are still experiencing strong growth, prospects for mergers and acquisitions also abound.

blue Opportunities 33

Interesting facts about waterAbout 75% of the earth's surface is covered by water. Only 3% of this is freshwater, however, the remaining 97% being saltwa-ter. Looking at all the world’s freshwater supply, 69% is frozen in the form of glaciers and polar ice caps. Of the remaining 30%, the majority is soil moisture or deep groundwater, both inacces-sible to people. Only about 0.3% of the world’s freshwater is rel-atively easily accessible to people, above all the water contained in lakes and rivers. The world’s largest “container” of fresh water is Lake Baikal in Siberia. The availability of freshwater also raises ethical issues: for example, there is a growing conviction that access to water is a fundamental human right.

Water useWastewater transport

Wastewater treatmentReturn flow

Water treatment

Water influx

Residential Commercial Industrial Agricultural

Water’s value creation chain

Source: Vontobel

34 blue Blue Pages

News from the Vontobel Group.Blue Pages:

Daniel Lüscher, the Vontobel Group’s new HR directorAs of 1st May 2012, Daniel Lüscher joined the Vontobel Group as the new head of Group Human Resources. The 46-year-old St. Gallen graduate has a rich track record in human resource management, and most recently held a senior position in HR at Zurich Financial Services. Before that he was responsible for the human resources function at several internationally active com-panies in Switzerland and abroad.

Two Vontobel funds recognisedBecause of their positive performance, the fund analysis com-pany Morningstar has bestowed multiple recognitions on two Vontobel funds. The fund aligned to global equity markets re-ceived the prestigious Morningstar Fund Award for Germany, Austria, Switzerland, Spain, France, Italy, Luxembourg and the Netherlands. In addition, the emerging markets fund managed by Rajiv Jain was named “Best Global Emerging Markets Equity Fund” in Spain, Finland, Luxembourg and Italy.

Medienpartner

BEST SWISSBRANDS2012

BSB_Poster_120413_501x70_fin.indd 2 13.04.12 14:31

Vontobel places number 19 amongst Switzerland’s top 50 brandsIn the latest brand ranking by Interbrand, the world’s largest brand consultancy, and the Swiss business magazine BILANZ, Bank Vontobel came in at place no. 19 amongst the 50 most valuable brands in Switzerland. The citation stated: “The inte-grated business model of the small universal bank is working suc-cessfully. The good name, the bank’s emphasis on background and experience, as well as its commitment to Swiss values are all paying off: The brand continues to grow from strength to strength. Consistent brand management and an excellent net-work in cooperation with the Raiffeisen Group are also reinforc-ing the Vontobel brand in a challenging market environment.” The detailed report can be found at www.bilanz.ch/marken-das-ranking.

Vontobel@YouTube Vontobel is now represented on the video portal YouTube. Nu-merous contributions from the Vontobel Group are waiting to be discovered by interested users. For example, the company video with Dr. Hans Vontobel, current market assessments from the Chief Strategist, or commentary on investment products. Visit us at www.youtube.com/vontobelgroup.

Vontobel once again named best broker for Swiss equities The respected financial data provider Thomson Reuters regularly assesses the expertise of brokerage houses based on a widely distributed investor survey. In the current Thomson Reuters Ex-tel Survey 2012, Vontobel, like last year, was recognised as the best broker for Swiss equities. More information is available at www.vontobel.com.

blue Blue Pages 35

Swiss Derivative Awards 2012On 20th April 2012, Bank Vontobel was honoured with two awards at the industry-renowned Swiss Derivative Awards cer-emony for 2012. Winning the award for “Best Service” and the award for “Best Equity Product” for our benchmarked struc-tured product UNIT on the SMI®, Vontobel celebrated a suc-cessful evening.

“Power Your Life” weeks at VontobelThe Vontobel Group is committed to greater sustainability, not only in its business activities but also within the company itself. For the second time, Vontobel is undertaking an action pro-gramme for employees under the slogan “Power Your Life”. This year, three issues took centre stage: mobility, nutrition and health, and workplace resources. Various activities helped dem-onstrate that sustainability and a modern lifestyle can go hand in hand – and anyone can make a difference. The Vontobel Group is a co-founder of the Climate Foundation Switzerland. More in-formation can be found at www.vontobel.com/sustainability. New: High-yield bond fund

Vontobel has expanded its offering in bond funds with a product that is geared towards high-yield corporate bonds. These are securi-ties issued by companies with a relatively low credit rating. Such investments entail a greater risk of default, but as a rule the yield is significantly higher than that of a government bond with the same maturity.

Harcourt launches new commodity fundsWith a “dynamic” fund, Vontobel subsidiary Harcourt is ex-panding its product range in the field of commodity investment products. Like the already existing “Belvista” product, the new actively managed fund adjusts the over-or underweighting of individual commodities compared to the benchmark index. The new fund is intended for risk-conscious investors who are inter-ested in possible additional sources of return.

Vontobel Financial Products now in Singapore and DubaiSince the end of May 2012, Vontobel Financial Products are of-fering structured products in Singapore and Dubai to B2B4C cli-ents. In the Dubai derivative market, Vontobel has been present for several years with its own issuing platform. Now, Vontobel’s expertise and its unique electronic trading platform Vontobel de-ritrade® is also on offer to local clients.

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Restaurant

Sternen GrillSechseläutenplatz, 8001 Zurich-Bellevue, +41 44 251 49 49www.sternengrill.chAt Bellevueplatz you’ll find Zurich's best and most famous Brat-wurst, or veal sausage. For the moment, the grill is set up tem-porarily on the Sechseläutenplatz, but as of March 2013, the Sternen Grill will be back at its old location, just in time to cel-ebrate its 50th anniversary. To give you an idea just how revered these sausages are, during the summer months of June through August 2012, the beloved St. Gallen veal Bratwurst with hot mustard will be served onboard Swiss flights – in first class.

The Vontobel Guide to:

36 blue The Vontobel Guide to

Zurich

Opera

Opera Festival of St. MargarethenRömersteinbruch (Roman Quarry), A-7062 St. Margarethen, about 35 minutes from the centre of Vienna11th July to 26th August 2012, performances begin at 8:30 p.m.www.ofs.at This year, the open-air Opera Festival held in this ancient Roman quarry presents Georges Bizet's opera “Carmen”. For this sum-mer’s performances, Robert Herzl transplants the opera’s action to the time of the Spanish Civil War, giving the plot an addi-tional poignancy. The impressive Roman site is one of the oldest quarries in Europe, named a World Heritage Site by UNESCO in 2001. Thanks to this imposing setting, an opera here is a cultural as well as natural experience not to be forgotten.

Vienna

Festival

Zurich Theatre Spectacle16th August to 2nd September 2012, Landiwiese, Rote Fabrik, Shipyard, advance ticket sales from Wednesday 11th July 2012www.theaterspektakel.chAlways ringing out the summer, the Zurich Theatre Spectacle rep-resents the magic of an open-air season at its best. Since 1980, this event has become one of the most important festivals of contem-porary performing arts in all of Europe. In addition to performances in unusual venues, such as a stage floating on the lake, street artists from around the world entertain one and all in the free-access area of the Spectacle, having made their annual pilgrimage to the Landiwiese on Lake Zurich to show off their varied talents.

Restaurant

The Dom BeislVienna 1, Schulerstrasse 4, A-1010 Vienna+43 1 512 03 02, www.dombeisl.atThe Dom Beisl – the Cathedral Pub – is a blend of bistro and discreetly modernised pub, sporting light wood paneling and an open, high-tech kitchen. Here you will find a wide range of varied seasonal delights to make the gourmet's heart beat a little faster. To create his dishes, top chef Harald Riedl calls upon French classic cuisine, Mediterranean imagination and Viennese tradition. His particularly well-known speciality is stuffed rabbit legs prepared in a clay cooker.

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blue The Vontobel Guide to 37

Museum

RosengartPilatusstrasse 10, 6003 Lucerne, +41 41 220 16 60, [email protected], April to October: Open daily from 10:00 a.m. to 6:00 p.m. (including holidays), www.rosengart.chThanks to a decades-long friendship between Siegfried and An-gela Rosengart and Pablo Picasso, this most inspiring of 20th century artists is present here with over 30 impressive paintings, mostly from his later oeuvre. About 100 drawings, watercolours and graphic as well as sculptural works by the famous artist are also on display in the exhibition. Belonging to the Rosengart Col-lection as well are works by Paul Klee, demonstrating the inex-haustibly visual and narrative richness of his talents. Klee is repre-sented with 125 beautiful watercolours, drawings and paintings.

In each edition of “blue”, different Vontobel teams will present a selection of local highlights.

Restaurant

Restaurant Barbatti Töpferstrasse 10, 6004 Lucerne+41 41 410 13 41, [email protected] Restaurant Barbatti, with its Italian version of Belle Epoque finery, has always been a meeting place for famous personalities from Lucerne’s cultural, political and economic scene. For more than eight years, the restaurant has been run by Signor Tom-maso Vaglio, who has not only beautifully managed to maintain the excellent balance between tradition and needed modernisa-tions, but also to carry on the success story of the restaurant’s special sense of hospitality for his selected guests.

Lounge & Bar

22nd Lounge & Bar Neue Mainzer Strasse 66–68, 60311 Frankfurt am Main+49 (0)69 210 880 Open Mon. to Sat. 6:00 p.m. to 1:00 a.m., closed Sun.High above the rooftops of the metropolis on the Main, 22nd Lounge & Bar is located on the 22nd floor of the Eurotheum. With cool jazz, live entertainment and a place at the “sunken” bar – where the bartender is at eye level with the guests – there is hardly anywhere in central Frankfurt where you can feel as comfortable and at the same as cosmopolitan. Leather chairs, wine-red walls and floor-to-ceiling panoramic windows allow breathtaking views of the city of Frankfurt.

Frankfurt

Exhibition

MuseumsuferVarious locations, Frankfurt am Mainwww.museumsuferfrankfurt.deOn the two banks of the River Main there are 13 museums al-together, offering visitors the chance to peruse an exceptional range of both national and international art and cultural history, and making Frankfurt one of the most attractive cities in Europe for enthusiasts of art and culture. The Museumsuferfest (Mu-seum Embankment Festival), where for three days millions of visitors enjoy a mix of art, culture, music and speciali-ties from around the world, is a highlight in the agenda of many Frankfurt natives. In 2012, the festival runs from 24th to 26th August.

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38 blue Buchecke

Book Corner

David BosshartThe Age of Less – Die neue Wohlstands-formel der westlichen Welt

In this book, David Bosshart, director of the world famous Gottlieb Duttweiler In-stitute, posits an era of “less and less”, in contrast to the dominant logic of today, namely “more and more”. He argues for a new, substantial growth – one that is not merely stubbornly focussed on the numbers. For him, it is clear that if we want to maintain our prosperity tomor-row, we need to make substantial chan-ges to our economic frameworks now. A clarion call for a switch to an “Age of Less”, this book makes a series of nuan-ced arguments.

Title: The Age Of Less – Die neue Wohl-standsformel der westlichen WeltAuthor: David BosshartPublished by: Murmann VerlagPublication date: 2011, 1st editionLanguage: German/223 pagesISBN: 978-3-86774-156-9

Locations

Bank Vontobel AGGotthardstrasse 43, CH-8022 ZurichTelephone +41 (0)58 283 71 11

Vontobel Swiss Wealth Advisors AGTödistrasse 17, CH-8022 ZurichTelephone +41 (0)44 287 81 11

Bank Vontobel AGSt. Alban-Anlage 58, CH-4052 BasleTelephone +41 (0)58 283 21 11

Bank Vontobel AGSpitalgasse 40, CH-3011 BerneTelephone +41 (0)58 283 22 11

Bank Vontobel AGSchweizerhofquai 3a, Postfach 2265, CH-6002 LucerneTelephone +41 (0)41 249 31 11

Banque Vontobel SAPlace de l’Université 6, CH-1205 GenevaTelephone +41 (0)22 809 90 90

Bank Vontobel Europe AG, Frankfurt am Main BranchWestendDuo, Bockenheimer Landstrasse 24 D-60323 Frankfurt am MainTelephone +49 (0)69 695 996 300

Bank Vontobel Europe AG, Hamburg BranchSudanhaus, Grosse Bäckerstrasse 13, D-20095 HamburgTelephone +49 (0)40 638 587 0

Bank Vontobel Europe AG, Cologne BranchAuf dem Berlich 1, D-50667 Cologne Telephone +49 (0)221 20 30 00

Bank Vontobel Europe AGAlter Hof 5, D-80331 MunichTelephone +49 (0)89 411 890 0, Telefax +49 (0)89 411 890 30

Bank Vontobel Österreich AGKärntner Strasse 51, A-1010 ViennaTelephone +43 (0)1 513 76 40

Bank Vontobel Österreich AGRathausplatz 4, A-5020 SalzburgTelephone +43 (0)662 8104 0

Vontobel Europe SA, Milan BranchPiazza degli Affari, 3, I-20123 MilanTelephone +39 02 6367 3411

Thema

blue 6/X


Bank V

ontobel AG

Renata Fäh

Gotthardstr. 43

P.O. B

ox8022 Zurich

DisclaimerThis brochure is for information purposes only and does not constitute an of-

fer of any kind. The services described in this brochure are supplied under the

agreement signed with the service recipient. The nature, scope and prices of

services and products may vary from one country to another and are subject to

change without notice. Certain services and products are not available world-

wide or from all companies of the Vontobel Group. In addition, they may be

subject to legal restrictions in certain countries.

Masthead

EditorBank Vontobel AGMarketing Private Banking (M. Rose, R. Fäh)Gotthardstrasse 43, CH-8022 ZurichTelephone +41 (0)58 283 71 11

[email protected]

LayoutIdentica AG, Zug

PrintingClimate-neutral printing by Schellenberg Druck AG. Published four times per year in German and English. Reproduction, in part or in whole, is strictly prohibited without written permission from Bank Vontobel AG.

IllustrationIllustration p. 23: Jürgen Willbarth

English versionJames Wade, Hurst & Freelancers


Bank Vontobel (Liechtenstein) AGPflugstrasse 20, FL-9490 VaduzTelephone +423 236 41 11

Vontobel Asia Pacific Ltd.2301 Jardine House, 1 Connaught Place, CentralHongkongTelephone +852 3655 3990

Bank Vontobel (Middle East) Ltd.Liberty House, Office 913, P.O. Box 506814Dubai, United Arab EmiratesTelephone +971 (0)4 703 85 00

“Water ismore valuable than oil –at least forhuman life.”

Regula Meierhofer, Director of Sodis

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High-flyerChristoph Franz:Flying – a moment of leisure

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