Water – investment theme par excellence

Global water demand is growing faster than the world’s population. Unlike other materials such as oil or gold, however, water is not a tradable commodity. Water purification and supply, along with wastewater treatment, are therefore much more interesting themes for the sustainable investor. Sustainably managed investments in the water infrastructure – whether over a horizon of five or 50 years – present huge growth opportunities. Bank Sarasin’s Sustainable Research team has compiled a universe of companies that make a sustainable contribution to the supply of water and treatment of wastewater. In the last five years the sustainable water universe has easily beaten the global equity market (as measured by the MSCI World Index).

Bank Sarasin’s sustainability experts expect the water companies sector to grow by 4-5% per year on average in real terms up to 2020. The largest segment of the water industry in terms of sales is that of “Utilities”, which are predominantly owned by the public sector, however. Consequently the spotlight falls mainly on suppliers, since the utilities invest almost half their revenues in components (pumps, pipes, etc.) and construction works. Companies offering products that save water, or manage water more efficiently in their production processes, will also benefit in view of water scarcity.

Focus on renewal and expansion

Since investment in the renovation of the water infrastructure has been neglected for decades, there is now a growing need to renovate networks in the more advanced economies. It is vital to prevent the amount of water lost through leaks from rising still further. In emerging economies and newly industrialised nations, the main challenge is the expansion of the water infrastructure. The emphasis here is on ensuring effective wastewater treatment, since the pollution of water courses has reached a dangerous level and is increasingly threatening the provision of fresh drinking water.

Demand being driven by newly industrialised countries

As living standards rise in the newly industrialised countries, so eating habits are shifting in favour of greater meat consumption. A large amount of arable land is needed to grow fodder for meat production. However, there is a shortage of agricultural land watered by rain, so that expanding agricultural land usually requires artificial irrigation. This trend clearly demonstrates how demand for water is continuously rising. Scarcity drives the need for increasingly expensive water treatment. Global water demand from households, industry and agriculture is increasing by roughly 2% every year and is growing faster than the population. Click here for  Investment fund structuring for startups.

Sustainable investment in water

Bank Sarasin’s Sustainable Research team has compiled a universe of companies that make a sustainable contribution to the supply of water and the treatment of wastewater. The sustainable water universe also includes industrial companies from water-intensive sectors (e.g. paper) that distinguish themselves by their sustainable use of water. All companies in the water universe are first subjected to a sustainability analysis and must receive at least an average sustainability rating compared with their peer group. As with all of Bank Sarasin’s sustainability funds, the exclusion criteria nuclear energy and armament also apply.
As the water sector is made up of a large number of subsegments, industries with lower and higher sustainability ratings are represented in the sustainability matrix. The matrix includes companies such as Georg Fischer (GF), Rotork or Kubota from the mechanical engineering sector and the water-specific themes of pumps & valves or irrigation equipment. It also contains companies from the consumer goods and packaging sector (Henkel or Mayr Melnhof), which distinguish themselves through water-saving production processes. The Swiss sanitaryware company Geberit scores an excellent rating.

This rigorous and systematic selection process makes it possible to minimise risks and maximise opportunities. In the last five years the sustainable water universe defined in this way has easily beaten the global equity market (as measured by the MSCI World Index), with a performance of 22%. Given the structure of the water sector, Bank Sarasin’s sustainability analysts believe that a global and well-balanced portfolio of water industry shares is an effective option for both private and institutional investors.

Upcoming Events

31st May 2012
SIX – ConventionPoint, Zurich

PIP Investor Zurich

For the 5th consecutive year the PIP Investor Zurich Conference 2012 will feature contributions from senior investment specialists and major allocators, analysing current behaviour across financial markets. As downgrades and politics continue to implicate the growing concerns in Europe, we evaluate to what extent will the impact of inflationary pressure have on global bond and commodity portfolios? 

With unprecedented volatility in equity markets, are traditional investment techniques still appropriate for institutional investors and does diversifying a portfolio really work in today’s financial markets? Our experts will evaluate whether the Swiss franc is likely to get stronger and what lessons have hedge fund managers learnt from the previous crisis? All this and more from this year’s PIP Investor Zurich conference. 
Alongside the main conference will feature a host of interactive workshops, dedicated exclusively to a number of timely investment strategies

PIP Investor Zurich

25th September
SIX – ConventionPoint, Zurich

Global ETPs delivered total AUM growth of $191.1bn so far in 2012 driven by $66.0bn of inflows and $125.1bn of favourable market and exchange rate movements. Fixed income was the top asset gathering category for the year with $25.5bn or 39% of total net new assets. North America Equity attracted $21.6bn YTD or 33% of total ETP inflows. Europe equity ETPs relinquished ($5.9bn) YTD concentrated in April outflows from German DAX products.* 

This ETF seminar will provide a dedicated and educational platform, offering professionals a concise and timely insight into the latest themes and topics concerning the ETF landscape. 

As the industry continues to evolve, professional investors are challenged with new themes concerning the ETF landscape. The seminar will elaborate on topics concerning ETF product innovation, optimum strategies for portfolio implementation, due diligence of ETPs, as well as looking at regulatory developments by ESMA.