29 Nov 2019
29 Nov 2019
With ESG investing finally reaching the mainstream it rightly deserves, Lyxor ETF is bringing the latest thought leadership straight to investors. In this week’s guest blog, Eleanor Willi, ESG Investing Specialist at RobecoSAM, explains the role of technology in addressing two key challenges for a sustainable planet: access to clean water, and affordable new energy.
Sustainable investing is guided by a simple and powerful mission: to tackle the most important challenges facing the planet today. RobecoSAM is an investment specialist focused exclusively on sustainable investing, and was founded in 1995 on the belief that sustainable companies are truly better companies: the pursuit of sustainability reduces risks and creates positive, long-term returns.
We have developed a broad range of sustainability solutions for ethical investors to address some of the most pressing global challenges. Two of these key challenges are clean water provision and new energy generation.
Water is essential for life. However, many people living in the developed world increasingly take their water supply for granted. It’s easy to understand why: crystal clear drinking water flows in abundance from the taps in our homes, schools, and workplaces. Many of us don’t give a second thought to the challenge of providing clean water to our taps, much less how much of this finite resource we consume daily. But for most of the world, clean drinking water is a precious commodity.
Although water covers about 70% of the Earth’s surface, we rely on annual precipitation for our actual water supply. About two-thirds of annual precipitation evaporates into the atmosphere, and another 20-25% flows into waterways and is unfit for human use. Only 10% of all rainfall remains for personal, agricultural and industrial use. Moreover, precipitation is not evenly distributed: 1.2 billion people live in areas of water scarcity, and pollution has made much of that water unfit for use. Meeting the world’s increasing water needs has rapidly become one of the biggest challenges facing society.
Water scarcity, driven by increasing populations and climate change, continues to be a major global challenge. Worldwide, around 2.2 billion people live in water-stressed areas, and 4.2 billion lack safe sanitation services. Recent reports have suggested that by 2030, water demand is likely to exceed supply by 40%, and half of the global population will suffer from water stress. To tackle the challenge of water shortages, companies in the water sector are exploring new strategies and aiming to invest more in water projects.
The water industry is increasing the use of smart solutions such as artificial intelligence (AI) to combat the effects of problems such as aging infrastructure, climate change, severe weather and increasing demand. Using AI for water resource prediction, management and monitoring shows potential in limiting the severity of the global water crisis. One example of this potential is with respect to floods. An estimated 250 million people are affected by floods every year, and studies suggest that AI-enabled improvements to forecasting could enable flooding early warning systems with the potential to save over 3,000 lives, reduce the number of those made homeless by 1.2 million and reduce economic damages due to flooding by approximately USD 14 million between now and 2035.
While water resources are limited, demand for water is rapidly increasing. Population growth, urbanisation and water-intensive dietary changes result in rising industrial water demand. Implementing solutions to these challenges is critical to survival and fundamental to further economic growth, making this one of the major growth opportunities of our time. Lyxor’s World Water ETF launched in 2007 invests in companies with a significant (over 40%) share of revenues along the water value chain: in water infrastructure, water treatment or water utilities.
Turn the tide on water scarcity with the Lyxor World Water UCITS ETF, created in collaboration with RobecoSAM.
It’s no secret that traditional, fossil fuel-based energy generation is responsible for a significant amount of global pollution. ‘Alternative’ or ‘new’ energy refers to the range of energy sources that can replace fossil fuels in the future, including solar, wind, hydro, geothermal and biofuels.
The demand for alternative energy remains primarily driven by government support, in the form of feed-in tariffs and subsidies. However, rapidly declining costs and increasing efficiency in technologies that previously were relatively expensive, like solar, suggests that government support may become a less important driver of demand for renewable energy in developed countries in the future, with cost-effectiveness playing a more important role in its adoption.
Due to the improving economics of renewable installations and increasing government support in emerging markets, particularly China, alternative energy is forecast to account for a growing share of the global electricity production mix.
Given the huge potential and increasing demand for renewables, it is clear that companies that are effectively investing in renewable energy generation and distribution, energy efficiency and in energy storage technology have considerable growth potential. Recognizing this, the ETF invests in companies with a significant (over 40%) share of revenues along the alternative energy value chain: in distributed energy, energy efficiency, and renewable energy.
Build a cleaner future with the Lyxor New Energy UCITS ETF, created in collaboration with RobecoSAM.
This article is for informative purposes only and should not be taken as investment advice. The opinions expressed by Eleanor Willi are her own, and do not necessarily reflect the views of Lyxor International Asset Management or Societe Generale. Capital at risk. Please read our Risk Warning below.
This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets in Financial Instruments Directive 2014/65/EU. These products comply with the UCITS Directive (2009/65/EC). Société Générale and Lyxor International Asset Management (LIAM) recommend that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID are available free of charge on www.lyxoretf.com, and upon request to email@example.com.
Except for the United-Kingdom, where this communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658, this communication is issued by Lyxor International Asset Management (LIAM), a French management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS (2014/91/EU) and AIFM (2011/61/EU) Directives. Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority).
The products mentioned are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the London Stock Exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. Updated composition of the product’s investment portfolio is available on www.lyxoretf.com. In addition, the indicative net asset value is published on the Reuters and Bloomberg pages of the product, and might also be mentioned on the websites of the stock exchanges where the product is listed.
Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. It is each investor’s responsibility to ascertain that it is authorised to subscribe, or invest into this product. This document is of a commercial nature and not of a regulatory nature. This material is of a commercial nature and not a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (together with its affiliates, Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.
Lyxor International Asset Management (“LIAM”) or its employees may have or maintain business relationships with companies covered in its research reports. As a result, investors should be aware that LIAM and its employees may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see appendix at the end of this report for the analyst(s) certification(s), important disclosures and disclaimers. Alternatively, visit our global research disclosure website www.lyxoretf.com/compliance.
Conflicts of interest
This research contains the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to (i) ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees.