Countryside Matters 2014 - page 30-31

Countryside
Matters
28
Countryside
Matters
29
INVESTING IN THE FUTURE
INVESTING IN THE FUTURE
whydon’twehave the right todo it today?” In somuchof theassessment of
“sustainability” there iscomplexityandaneed forbalance. It isabout takingan
issue,understanding itandthinkingabout it inthe longterm.
At Sarasin and Partners, our portfolios typically contain 60 investments in
different companies fromall around theworld, andyouget toknowverywell
whateachcompanydoesandhow itthinks.And,ofcourse,witheverycompany
there will be grey areas. We need to consider each company on its merits
andassesshowwell it handles the challenges it faces, rather thanmake snap
judgmentsonwhatconstitutesthe idealgreen investment.
A lotof theearly thoughtprocessesaroundresponsible investmentwerealong
thelinesof“youmustn’tbuyanysharesinoilcompanies,andyoumustbuyshares
inpeoplewhomakesolarpanels”.Nowthatmakessensefromanenvironmental
campaigning perspective, but from an investment perspective we’ve got to
realise thatwearegoing tobeburningoil formanydecades tocome.Yes, the
amountof renewables in theenergymix isgoing togrowverysignificantly,but
thatdoesn’tnecessarilymean thatmanufacturersof solarpanelsaregoing to
makeanawful lotofmoney.And indeed thathas turnedout tobe thecase, in
thatquiteanumberof themhavegonebustbecause theyweredependenton
subsidy, and then theGovernment ranoutofmoney.Foran investment tobea
soundone,youneedtothinkabout it intheround, fromafinancialperspective
andarealworldperspectiveaswellasthe idealisticdimension.
“InAsiaandAfrica the
consumptionof chocolate is
growingatabout10per centa
year; froman investmentpoint
ofview,10per cent is
anattractivegrowth trend.”
Often,smartinvestmentsbackcost-effectivesolutionstodealwithenvironmental
depletion.Takewater, forexample.Agriculture isstillbyfarandawaythe largest
consumeroffreshwater intheworld.Quitea lotof ithappenstodropoutofthe
sky,butthere isthe issueofwaterabstractionandthedepletionofwatertables,
notsomuchintheUKbutinotherpartsoftheworld.Sohowdoesaninvestment
companyapproach this? Is thereanyalignment betweenattempts toprevent
over-abstractionandan investor’s requirement tomakean investment return?
Oneexamplemight bean investment inmicro-irrigation in India,whereat the
moment theyhavevery inefficient irrigation systems. Forexampleacompany
calledJain Irrigation is seeing stronggrowth in salesof itsmicro-tubingwhich
dramatically reduces water use compared with the field flooding techniques
traditionallyused.
Thepressingneed to feedourevermorecrowdedplanetgivesusanotherkey
pointeronwhereto invest.Oneofthestrongestdemandpressuresoverthenext
few decades is the need to raise agricultural yields, becausewe have a finite
amountof farmlandbut,everyyear,70millionmoremouthsto feedworldwide.
So,findingcompanieswhichare focusedon improvingproductivity in the food
chainmakesgood investmentsensetous.
Agriculture in theUK isprettyefficient.We tend toget aprettygoodyieldoff
most of the farmland in theUKandour productivity is something the rest of
theworldcan emulate –maximising theyieldof the landwithoutdamaging it
for future generations. An enormous improvement in global productivity can
actually bemade from better seeds, better nutrients, better storage and less
wastage.
The other key trend in the food chain is the changing diet of those in the
emergingmarkets, suchasChinaand Indiawhere,as theeconomiesgetricher,
moreandmorepeopleareadoptingamiddleclass lifestyle.Theyareshopping
in supermarkets, eating much more fresh fruit and vegetables, more dairy
productsandmoremeat, and these trendsaregoing to last fora long time. In
AsiaandAfricaat themoment, for example, the consumptionof chocolate is
growingatabout 10%ayear,andfroman investmentpointofview, 10% isquite
anattractivegrowthtrend.
Over thepastdecadewehaveseeneconomicconditions
improve for food producers. We no longer have the
stockpiles of grain and butter mountains which made
headlines in the 1980s and 1990s, and this has pushed
up prices so that farmers are at lastmaking a bitmore
money,andareableto invest intractorsandthe like.
Inaddition, therehasbeenmuchmoreeconomic “value
add” in the food chain as the global diet improves. For
example, a large increase in food processing, in chill
freshandpackaging andall theotherways theeconomy
makesmoneyoutof food.Peoplewhowouldneverhave
dreamedofgoingtoarestaurantafewyearsagoarenow
2013
Salesof chocolate inAsiaandAfrica
since 1999havedoubled
1999
AsianandAfricanconsumptionof chocolate
SOURCE:THEECONOMICTIMES
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