26 April 2021

Resource scarcity – a burning issue driving real investment change

by Ian Oxley, Partner, Silverfleet

Over the last decade, Silverfleet has identified five ‘megatrends’ driving financial markets over the long-term. These include increasing urbanisation, ageing populations, resource scarcity, growth in technology and growth in regulation.

In the third instalment of a five-article series for Real Deals, Ian Oxley, Origination Partner at Silverfleet, takes a look at ‘resource scarcity’, delving into both the challenges and the investment opportunities this trend represents.

The world’s population is growing rapidly. By 2050 alone, it is forecast to increase from 7.7 billion people in 2019, to just under 10 billion. This exponential growth brings with it a number of challenges, including an increased demand for essentials, such as clean water, food, housing and energy, as well as consumer goods and services.

This level of demand is becoming increasingly difficult to meet. As well as the depletion of natural resources brought on by climate change and wider environmental and sustainability issues, the increasing sophistication of hi-tech products such as smartphones and electric vehicles is also placing pressure on the supply of commodities such as rare metals. 

Resource scarcity is thus cementing itself as a fundamental concern and a major challenge for governments, consumers and businesses globally. However, to accommodate a greater demand for natural resources, we believe there will be increased innovation to optimise the use of resources. 

Investors are increasingly attaching a ‘green’ premium to firms leading the charge on issues such as sustainability and resource management, and such considerations have risen to the top of the investment evaluation and valuation processes, including our own. 

In 2018, Silverfleet established an ESG Steering Committee and implemented a new, rigorous ESG process that stretches from due diligence through ownership and, ultimately, exit. In October last year, we announced that Silverfleet was now carbon neutral across all our offices.

This emphasis on resources is reflected across our portfolio holdings. Coventya, for instance, focusses on improving the sustainability of its customers in the surface coating industry. Germany-based Prefer Resins is a key supplier to the insulation industry, directly helping businesses and consumers to reduce their own energy usage.

Themes we are currently investigating include clean water services; alternative / green energy suppliers; improvements in agricultural yield; CSR and ESG facilitators; the retraining and upskilling of employees; and carbon capture / carbon storage. New ideas around decarbonisation are also coming into play, with a focus on new processes and materials, including hydrogen as a sustainable energy source representing powerful investment opportunities. 

Read the full piece here.

Read the first instalment of the series, ‘The opportunities for investors from the rise of smart cities’, here. For the second instalment, ‘Ageing populations: the golden investment case from an increasingly ‘silver’ world’, click here.

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