“It’s really a unique mechanism for investors themselves and California to be able to at the very least understand and price the risk and potentially hedge the risk of water price volatility,” said Carter Malloy, founder and chief executive officer of AcreTrader, a farmland investing platform.

“The crucial thing is right now we have very little visibility” on what water prices will look like in the future, he said.

Water preservation and distribution could become increasingly attractive as investors like Jeff Ubben, who recently launched Inclusive Capital Partners, look to tackle problems ranging from environmental damage to food scarcity through their funds.

Climate advocates have warned in recent years for the potential of water wars as competition increases between needs from agriculture, energy and growing cities. Food production in particular could be vulnerable as drought makes it increasingly difficult to grow crops in many parts of the world and farmers balance water and land needs with protecting forest in places like Brazil’s Amazon.

“Food is going to be a flash point” in the world going forward as climate change makes production more challenging, Carter Roberts, chief executive officer of World Wildlife Fund, said in an interview at the Bloomberg Green Festival this week.

Eoin Treacy's view

A couple of the other directors at the Nevada Trust Company sit on the board of Ducks Unlimited. It’s a conservancy group run by hunters and aims to protect as much wetland habitat has possible. Water rights and abeyance agreements are the bread and butter of the organisation.

From many conversations I’ve learned that most of West Coast’s water access agreements date from the time the frontier was settled. That means some farms have more water than they can use while other have too little. Some landowners have legacy water rights on a “use it or lose it” basis. That’s means taps are left open when no economic activity is in place, so they can retain the water rights for future use. Water is a precious resource but it can’t be stored just anywhere and everything about the market is political.

The clearest trend globally is the migration of people to the coasts. That is creating cities that are very thirsty. Population density along is likely to act as a structural tailwind while weather is an obvious wild card in terms of supply.