Partner Insight: Waterworlds, wastescapes and cashflows

Bertrand Lecourt, portfolio manager of Fidelity's Sustainable Water & Waste Fund, offers an investor's perspective of the global water & waste industries

Every country around the world has substantial water and waste industries but, according to Fidelity's Lecourt, they are all very local. "So you don't have a Google of water, you don't have a Google of waste," he says. But over his career he's watched the market scaling up.

"30 years ago, you probably had around 30 serious companies to play with as an investor. Today you have 330 or more companies," he says. "Likewise they are bigger in size, so the total market cap for investment might be $1.5-1.6 trillion - again 10 times bigger than it was 30 years ago."

Gradual growth

That industry growth is driven by five long-term water and waste drivers that Lecourt has identified: urbanisation, consumption growth, an increasing infrastructure gap, tightening global regulation, and resource scarcity. Rising consumption is especially important as richer consumers buy more products that consume water and generate waste.

But as households get richer in developing countries, they also have more capacity to pay directly for higher quality water and waste services. The cost of water and waste services is increasing but it continues to represent a relatively small proportion of each household budget, Lecourt says. So even in developed economies, households often don't notice the monthly cost, especially on the waste side. Not many people can tell you how much they are paying for rubbish collection, he points out.

 Tech tortoise

The growth potential of new technologies in water and waste is also exciting, but Lecourt warns that in these industries nothing happens overnight. "You can see it coming, but it takes time and, especially with water, must be carefully tested before it's scaled."

He says a range of new sensor technologies are coming in so that, instead of replacing all their pipe infrastructure, companies can adopt a more surgical approach. He's also interested in new robotic, filtration and metering technologies.

"On the waste side things are also changing a lot. Rather than simple landfill, you have new technologies that allow you to extract the gas to make electricity, direct the waste into energy to make power, and recycle waste, whether it's metal or plastic."

But the new technologies need to be embedded in existing local processes and services. "So although there's a lot going on now in water and waste, sometimes I prefer to call it ‘slow tech'," he jokes. As a long-term investor, he's attracted to the idea of slower, compounding growth in a regulated, relatively steady investment landscape.

Click here to further explore the world's water & waste value chains with Bertrand Lecourt in a unique, interactive guide

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The value of investments (and the income from them) can go down as well as up and you may not get back the amount invested. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. This fund can invest in overseas markets and so the value can be affected by changes in currency exchange rates. It can also invest in emerging markets which can be more volatile than other more developed markets. The fund may use derivatives for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger-than-average price fluctuations. 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. Investments should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document and annual and semi-annual reports, free of charge on request by calling 0800 368 1732. Issued by FIL Pensions Management, authorised and regulated by the Financial Conduct Authority and 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. UKM0520/31139/SSO/NA