Dublin-based specialist investors KBI Global Investors (KBIGI) has marked the 25th World Water Day and the United Nations’ continuing campaign for freshwater and sanitation, with the launch of a new video outlining its Water Strategy.
Staged as a means of focusing the world’s attention on the importance of freshwater and the sustainable management of freshwater resources, the UN’s World Water Day seeks to highlight a specific aspect of freshwater each year, with ‘wastewater’ the designated theme in 2017.
Sheldon refers to the company’s view that water investing has hit a ‘third wave’, as the “perfect backdrop” to mark the 25th World Water Day.
“We are at the front end of the next wave of investing in water,” he said. “If you look back at the early 2000s water spending was driven by the developed market housing boom.
“After the great financial crisis, we saw wave two, driven by industrial water – whether it was the energy renaissance in the US, Chinese stimulus or global corporations taking seriously for the first time their responsibilities in addressing their energy and water footprints.
“Wave three is driven by infrastructure and policy-led initiatives. We’re going to see US$12trn spent on water infrastructure by 2030, as much as in telecoms and power. The populism that we are seeing in politics around the world is now flooding the water space, and people are demanding better quality water, no longer content with contamination,” he said.
In the past “politicians knew” that the way of maintaining their leadership was “the delivery of low-cost water”, Sheldon added. However, today their motivation is “to ensure they’re not on the front page because they left problems unaddressed”.
“We only need look back a couple of years to the crisis in Flint, Michigan – where cost-cutting measures led to tainted drinking water – to see how media sentiment has changed,” he added.
Sheldon points that spending on the water infrastructure of the US has been far too low, for too long, and needs to increase substantially. As a result, KBIGI has more than 75% of the portfolio in stocks classed as infrastructure (i.e. companies involved in building, or providing equipment or services for water infrastructure).
Increased infrastructure spending should benefit the strategy, particularly with new US president Donald Trump’s promise of commitment, added Sheldon.
KBIGI established its standalone Water Strategy in 2000. A high conviction, global, long-only equity portfolio, it invests in 35-50 publicly traded companies providing value-added solutions to meet the vital, global need for water. The strategy, one of the first of its kind globally, has outperformed the MSCI ACWI in 12 of 16 calendar years.
In 2016, the strategy delivered an excess return vs. MSCI ACWI of +7.3% (US$ to 31.12.2016, gross of fees), according to KBIGI’s statistics.