We asked Fidelity's Bertrand Lecourt why this theme might prove so powerful for investors - and the world
"If you stop water, the economy stops," says Bertrand Lecourt, who likes to adopt a fundamental, long-term perspective. He points out that for thousands of years, as civilisation developed, humans built their economies around the twin challenges of managing water and waste.
"People settled near the seas, the rivers, the lakes, and then used water for agriculture and energy. As communities got bigger, our cities needed clean water to be healthy. And all along, our increasing wealth has generated more and more physical waste." But investment in managing water and waste has come in waves.
"We see in London a waste water system developed 150 years ago to accommodate perhaps one million inhabitants and now around 10 million people use essentially the same system. You simply have to improve it, for example, with the new super-sewer now being put into play."
Lecourt, a 20-year water and waste veteran, says five drivers operating for thousands of years on water and waste management are now being leveraged by our modern world. "The first is urbanisation," he says. As the global population grows it is moving to cities, including a rising number of megacities of more than 10 million inhabitants.
"By 2050, nearly 70% of the global population may live in cities," he says.* These cities will demand more intensive water and waste industries with higher standards.
The coronavirus outbreak has reminded us that we are physical, not digital, beings and that large concentrations of people must be well managed. "It's going to be about making sure you have a clean city environment, with great waste management and sanitation capacity," says Lecourt.
The second driver is that as wealth grows, consumption accelerates. "As you get richer instead of buying two shirts you buy four, and that means more water because everything you buy is water."
It's a striking vision of a water-borne economy. In Lecourt's world, a T-shirt represents roughly 2,700 litres of water; eating a kilogram more meat demands up to 15,500 litres of water; a cup of coffee is 140 litres of water.** This magnification of water demand is becoming even more important as Asian and other emerging economies generate a middle class with new consumer tastes.
While farming uses most fresh water globally, industrial demand for water has tripled over the last century, and domestic use of water has risen by 600% since 1960.***
Growing global consumption drives waste as well as water management. "95% of everything we buy is likely to become waste within two years: it's the other side of consumption," according to Lecourt.
Studies have shown that as GDP increases, the amount of waste per head also increases. And many of the most populous countries in the world, such as China and India, have tended to increase GDP at a fast rate.
He's keen on increased recycling as a partial solution but points out that "you still need a company to transport waste, clean it, and do something with it."
* Source: UN, World Urbanization Prospects: The 2018 Revision, p.xix
** Source: Estimates, based on Waterfootprint.org; accessed Spring 2020; approximations only
***Source: Betsy Otto and Leah Schleifer, Domestic Water Use Grew 600% Over the Past 50 Years, February 10, 2020
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