Today, over half the world's population live in cities. Rapid urbanisation is still underway in developing markets, while developed markets are dealing with increasing pressure on old infrastructure. Rising environmental regulation and health standards are also creating compelling opportunities for investors. The theme of water and waste is a structural global megatrend that impacts us all on a local level.
Water and waste - different investment opportunities, on common ground
The unique combination of investing in water and waste together provides access to two complimentary sectors which benefit from secular growth trends. Investments made across the two value chains vastly increases the investment universe, whilst providing greater diversification benefits compared to other investment vehicles that only focus on one of these sectors.
Despite the human need for both water and the flip side of consumption, waste management, water and waste are hugely under-research sectors globally. The combination of the two sectors also offers investors relatively defensive access to global equity markets. The combination can serve as a strong diversifier with no exposure to sectors such as technology, communications and financials.
Water & waste sectors - compelling opportunities for growth
Source: Fidelity International, Bloomberg, 30 September 2019. Waste Index represents BNP Paribas Global Waste Management Index, Water Index represents S&P Global Water index. All indices represent total returns in USD.
Past performance is not a reliable indicator of future results.
Three reasons to combine the water and waste sectors
Water and waste related companies share many key drivers of demand such as growing global population, increasing urbanisation, growing consumption and supporting regulation.
Processes involved in the water industry can create waste, while the waste industry uses a lot of water - think about waste water produced in households or the amount of water required to clean bottles for recycling.
Covering both the water and waste sectors means finding complementary yet differentiated companies. Combining both offers a wider opportunity set and spotting opportunities in one theme might highlight opportunities in the other.
The Fidelity Sustainable Water & Waste Fund
The Fidelity Sustainable Water & Waste Fund is the first UK fund to combine the water and waste sectors, aiming to deliver strong risk-adjusted returns across the cycle from a global universe of sustainable opportunities.
The fund adopts a global equity strategy with a focus on quality and growth, analysing companies across the entire water and waste management value chains. These companies benefit from powerful structural growth drivers relating to the ever-increasing demand for clean water, as well as the need to manage waste from a growing population.
The fund can invest globally across the water and waste value chains, including companies developing new technologies to meet the ever-growing demand for such products and services. The investment universe currently comprises a total of around 330 companies that are actively monitored for inclusion in the portfolio. Portfolio manager Bertrand Lecourt believes that by investing in companies which operate with high standards of corporate responsibility and overall ESG objectives, he can further protect and enhance investment returns for clients over the long term.
This information is for investment professionals only and should not be relied upon by private investors. Past performance is not a reliable indicator of future returns. Currency hedging is used to substantially reduce the risk of losses from unfavourable exchange rate movements on holdings in currencies that differ from the dealing currency. Hedging also has the effect of limiting the potential for currency gains to be made. Investors should note that the views expressed may no longer be current and may have already been acted upon. Changes in currency exchange rates may affect the value of an investment in overseas markets. Investments in small and emerging markets can also be more volatile than other more developed markets. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. The Investment Manager's focus on securities of companies which maintain strong environmental, social and governance ("ESG") credentials may result in a return that could, at times, compare less favourably to similar products without such focus. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security's ESG credentials can change over time. Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited.