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."
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.
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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