Water is a renewable but scarce economic resource that affects all economic activities, from urban water consumption to industrial production and agriculture. The sufficiency of the world's water resources is threatened by population growth, urbanization and rising living standards, as well as drought caused by climate change. Under the cross pressure of these factors, Australia, one of the world's driest continents, has solved the water allocation problem by creating the world's most advanced water market. This Master’s Thesis presents the Australian water industry and its special features and previous research literature with results. In the empirical part of the thesis, the returns of 11 companies operating in the Australian water market, the factors affecting returns and the possible diversification benefits of the shares were investigated in the review period from January 2000 to August 2022. The data included daily and monthly prices of shares and benchmark indices taken from Refinitiv DataStream. The study was carried out with linear regression using explanatory factors from previous research literature and previously unused rainfall and temperature variables. The diversification benefit of water shares was studied by comparing the expected returns and standard deviations of the market index and the investment portfolio expanded with water shares. The effect of climate change media attention and narratives on returns was investigated using ASVI data from Google search terms as a control variable. From the regression results, it was found that water industry stocks are weakly correlated with the market. Also, no correlation was found between the weather variables or the Google search terms used and the revenues of the water companies. Due to the weak market correlation, water stocks offer a diversification benefit by increasing ex-pected returns and reducing portfolio risk.