Investing in the world’s most valuable resource
A professional investor tells us where he’d put his money. This week: Louis Veilleux, Senior Investment Manager, Pictet Water fund.
Each week, a professional investor tells us where he'd put his money. This week: Louis Veilleux, Senior Investment Manager, Pictet Water fund.
Water is a vital natural resource. Unfortunately, less than 1% of all water on the planet is available and accessible for human use. The United Nations reckons that by 2050 the global population will have grown by 2.5 billion, so it is more important than ever to pay close attention to companies that focus on making the most of this resource.
Water conservation, improved sanitation, recycling, water-quality testing and better distribution will be key to ensuring the sustainability of life on an increasingly crowded planet and, for investors, offer a potential source of long-term capital growth. Investing in water is supported by several "megatrends": social, economic, political, and technological changes that go beyond short-term market fluctuations and affect society over a significant time horizon.
Urbanisation and recycling
Waste Management (NYSE: WM)
The firm could also profit significantly from developments in recycling automation over the coming years. Scarcity is another issue. Already, 50% of the global population lives under water stress. Increasingly uneven distribution of water resources requires better water conservation. Ecolab (NYSE: ECL) is a global leader in industrial water. It has created an innovative pricing mechanism, based around environmental Return on Investment (eROI), where it charges according to the water and energy savings made by its products.
Disease and infrastructure
Danaher (NYSE: DHR)
Constraints on public purses have led to historical underinvestment in utilities, and the need to upgrade infrastructure is ever more pressing. Water-research specialist Envisager forecasts that the population served by privately funded water will grow by 50% from 2015 to 1.8 billion in 2030. Water utility Sabesp (Brazil: SBSP3) offers water services for 25 million customers and sewage treatment for 23 million across So Paolo, a city with low sanitation coverage.
Since the last national election, local government members have called for greater sanitation coverage via more private partnerships, providing long-term opportunities for investment. Public-private partnerships will be key to creating a sustainable future, a trend we expect to pick up pace in the coming years.