In this article, we highlight the drivers of this transition as well as some examples to illustrate its global scale and fast evolution.

Key drivers

  1. Increasing consumption and urbanisation: Population growth, the wealth effect on consumption patterns, and rapidly increasing urbanisation all are driving a need for new or refurbished infrastructure, plus the development of tools and technologies designed to contain environmental damage. Cities need clean and reliable power, clean water and wastewater systems, food delivery systems, waste disposal, and pollution management. As more people move to metropolitan areas, these needs are ever more urgent. Almost two-thirds of the world’s population will live in urban areas by 2050. By 2030 there will be 43 megacities — urban centers with populations of more than 10 million. (There were just 10 megacities as recently as 1990.) In the more distant future, the vast majority of people will live in megacities.
  2. Pollution: A staggering 91 percent of the world’s population lives in places where bad air quality exceeds World Health Organization pollution limits. More drought-induced wildfires are creating ever more pollution and disrupting energy delivery. In a significant change, China has largely banned imports of plastics and paper waste from the rest of the world, causing a build-up in countries that can no longer export their trash.
  3. Water stress: A quarter of humanity faces looming water crises. Water scarcity is already a problem in parts of California, South Africa and India. The World Resources Institute reports that 33 cities, with a combined population of more than 255 million, currently face extremely high water stress. Hundreds of water systems today serve unsafe drinking water, in California and elsewhere. Boston’s new Seaport District and Miami Beach are being challenged by rising sea level, which is creating the need for new water infrastructure to prevent flooding.

Opportunities

The environmental challenges we face are spurring innovation by companies which are expanding their products and services to benefit from long-term growth in environmental markets.

Food technology

  • Food Tech: Digital technologies and analytics are transforming agriculture with computer vision, machine learning and robotics. These technological advancements are contributing to water efficiency and avoiding soil and groundwater pollution by drastically reducing the amount of pesticides and fertiliser needed to grow crops.
  • Alternative to plastics: Food packaging companies are partnering with specialty materials companies to offer plant-derived food packaging solutions to the food industry, replacing plastic packaging. Better packaging is also extending the shelf life for perishable products, thus helping to reduce food waste.

Cleaner transportation

  • Vehicles: Electric vehicle (EV) component providers are benefiting as the EV industry expands into new markets. Mobility technology companies are providing components to autos, enabling them to become smarter and more connected, improving energy efficiency and reducing greenhouse gas emissions.
  • Rail: China’s high-speed rail lines cover more distance than those of the rest of the world combined, and investments in lower carbon transportation infrastructure continues. China aims to increase high-speed rail coverage by another 20,000 miles, reaching 80 percent of its largest cities by 2020 and providing opportunities for high-speed rail equipment manufacturers and operators.

Energy & resource management

  • Raw materials: Digital energy management companies are using eco-design to minimize manufacturers’ use of raw materials, maximize circular supply chains, and slash carbon dioxide (CO2) emissions.
  • Smart waste: Waste management companies are using data to optimise trash collection and enhance efficiency, cutting CO2 emissions and costs.

Water efficiency

  • Water Tech: Water efficiency companies are partnering with technology companies to help industrial customers monitor and control their water usage and pollution in real time using cloud-based analytical capabilities.
  • Infrastructure: Further digitisation of the water infrastructure sector, including in China, drives continued strong growth for water infrastructure companies, despite the trade war. Additionally, smart sensors and wastewater solutions continue to be in great demand globally, as is the need for leak detection.

Within an investment context, this landscape provides differentiated and strong growth opportunities.

Sid Jha

Portfolio Manager, Associate Director

Sid is co-manager of the Leaders strategy and a member of the Portfolio Construction team for the Water and Global Opportunities strategies. He has research responsibilities in the Energy Efficiency and Water environmental sub-sectors and also researches stocks with a focus on US-Healthcare.

Sid joined Impax in 2014 after graduating from business school and interning with Impax’s Listed Equity team over the summer and autumn of 2012. In his pre-MBA career, Sid worked as a clean technology consultant in India.

Sid has an MBA with a focus in Finance from London Business School and a Bachelor of Arts in History and Political Science from Macalester College, where he graduated cum laude.

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