KBIGI - World Water Day 2021
“WHEN THE WELL IS DRY, WE KNOW THE WORTH OF WATER” (Benjamin Franklin)
With World Water Day 2021¹ focused on ‘Valuing Water’, Natural Resources specialist KBI Global Investors says the real value is not in clean water, but in the people and organisations assuring its reliable supply
It is the ultimate contradiction: water is invaluable, yet free. Without water, manufacturing stops, foods fail to grow, the economy crashes and ultimately, life ceases. It is a tough concept to get your head around, but when we pay for water, we are, with very few exceptions, paying for its treatment and transportation. The water itself is free. Only in its absence or during periods of scarcity does this value-price contradiction become readily apparent. As Benjamin Franklin said, writing in ‘Poor Richard’s Almanack’, “when the well is dry, we know the worth of water”.
Franklin’s observation highlights a critical point on World Water Day (first designated by the UN General Assembly on 22nd March 1993 and held on the same day each year), with 2021’s theme, ‘Valuing Water’, turning the spotlight on the escalating global water crisis. If appreciated only in its absence, perhaps the real value is not in clean water itself but in the people and organisations assuring its reliable supply; in other words, the value is in the value chain.
This value chain, says Catherine Cahill, Senior Portfolio Manager on the KBI Global Investors’ Water Strategy, “requires major investment to serve a growing global population, increased industrialisation, continued urban migration, changing consumer demands and contaminant remediation.” A large part of the investment is, says Cahill, “simply to fix what breaks”, and it is breaking at an increasing rate due to age, manifested climate change, and land subsidence. “To value water properly, we as a society must invest in it.”
KBIGI has been investing in water through its dedicated Water Strategy since 2000. “We don’t buy water low and sell water high”, says Cahill. “Rather, we invest in companies across the value chain, ensuring the reliable provision of clean water. This diverse group of global companies serving municipal, industrial and agricultural customers represents a valuable and unique investment opportunity set; they provide solutions which are helping us to build a resilient, sustainable water value chain across the globe.”
From KBIGI’s vantage point, the value chain continues to strengthen, with water companies rising to the challenge, adopting technologies that enhance sustainability and improve the customer experience. They are, for example, offering more innovative solutions in the areas of treatment and reuse to allow companies and utilities to navigate a world strained ever more frequently by climate change. The pandemic has highlighted the value of digital integration, with advanced analytics and remote monitoring and controls helping to efficiently find and address problems rapidly.
The value proposition, says Cahill, “is undeniable to the end user”, with a materially positive impact to society. “As the world emerges from lockdown and policy makers, all over the globe, look to prioritise stimulus spending, it is worth highlighting the significant value to be found through investment in water’s value chain.”
A recent MSCI ESG Research study² looked at 122 funds which explicitly include the water theme in their investment objective. Just 16 funds were found to have an exposure to sustainable water solutions of 10% or above, based on the weighted average of the fund holdings’ revenue.
“WHEN THE WELL IS DRY, WE KNOW THE WORTH OF WATER”../2
(MSCI consider 10% or above as representing high to very high exposure). KBI Global Investors were identified as managing two of the top five funds.
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² MSCI ESG Research LLC: ‘Water Funds’ Exposure to Sustainable Water Solutions’. November 2020
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NOTES TO EDITORS
- About KBI Global Investors (‘KBIGI’)
Established in 1980, KBI Global Investors is a specialist institutional asset management boutique, offering a range of Global Equities and Natural Resources strategies. The firm manages assets for a broad range of clients – public and corporate pension schemes, sub-advisory investors, foundations and endowments, wealth managers, private banks and investment intermediaries included.
KBIGI has a global client base and today holds mandates in the UK, Europe, North America and Asia as well as for some of Ireland’s largest and best-known corporations. Part of Amundi, the firm is headquartered in Dublin, with a representative sales office in Boston, Massachusetts.
KBIGI boasts a track record of delivering consistent and outstanding risk-adjusted investment performance over the longer term, its highly experienced investment team today managing €11.2bn. (This is the combined AUM of KBI Global Investors Ltd and KBI Global Investors (North America) Ltd at 28th February 2021).
The firm is headed by CEO Sean Hawkshaw, with members of the KBIGI team holding 12.5% of the equity in the firm.
- KBI Global Investors and Natural Resource strategies
One of the firm’s principal goals is to be first to market with value-adding investment themes of the future. In the late 1990s, KBIGI was amongst the earliest investors to recognise the inherent source of alpha (the active return on an investment) from investing in companies providing solutions to sustainability challenges related to the provision of food, energy, water and the mitigation of and adaptation to the impacts of climate change.
Having identified a compelling and clear need for investment in companies providing solutions to the global shortages of clean water and energy, the firm first launched strategies in these areas in 2000. Building up its team and intellectual capital in these themes, KBIGI added a climate change strategy in 2007, a sustainable impact agribusiness (food) strategy in 2008 and a sustainable impact infrastructure strategy in 2017.
From 2018 onwards, KBIGI has been reporting on the extent to which its Natural Resource strategies contribute to the achievement of the United Nations Sustainable Development Goals (‘SDGs’). This significant initiative involves the detailed classification of all revenues of the companies held in each portfolio, determining whether the activity from which those revenues arise is contributing, positively or negatively, to one or more of the SDGs.
KBI Global Investors Ltd is regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority in the UK. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. KBI Global Investors (North America) Ltd is a registered investment adviser with the SEC and regulated by the Central Bank of Ireland. KBI Global Investors (North America) Ltd is a wholly owned subsidiary of KBI Global Investors Ltd. ‘KBI Global Investors’ or ‘KBIGI’ refer to KBI Global Investors Ltd and KBI Global Investors (North America) Ltd.
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