Three sustainable investment themes for a low-growth future – Hermes
26 Apr 16
As the world wakes up to the new reality of extremely slow growth, there seems little doubt the returns investors became accustomed to during the ‘Great Moderation’ are a thing of the past.
A recent report by CDP (Carbon Disclosure Project) found water insecurity to be the largest risk to our society as a whole – with failure to manage this scarce resource challenging the economic prospects for countries and overall global growth. Corporates will need to include water management in strategy and investment planning, as well as risk management and mitigation. The good news is leaders are already emerging, with pragmatic water stewardship offering clear benefits to companies.
For investors, a long horizon of opportunities exist in this space – in areas such as water utility equities, corporate infrastructure bonds, water treatment project finance and water technology venture capital. In the immediate future, opportunities for investment are in water treatment and recycling, as well as more efficient usage – with the development and deployment of smart meters, surface and groundwater storage and improved irrigation. There are longer-term opportunities in desalination, water-friendly energy and various other technologies.
Despite barely scratching the surface of what we might achieve, it is estimated these areas alone will represent a market north of $1trn by 2020. Water represents a true long-term secular growth prospect.
Tags: Investment Strategy
