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Nature-supportive investments can outperform traditional market benchmarks through careful selection, and generate attractive, long-term opportunities
China is stepping up in developing nature-positive economic models and already leads in many research fields
Freshwater conservation and management has become a key and global concern. Advanced water treatment, as well as water-less and closed-loop cooling for AI technology and industry, are at the forefront of innovations
The real-world needs and economic pressures that are driving demand for nature-positive businesses are also creating opportunities for investors to build more diversified, climate-resilient portfolios.
Nature is arguably one of the most undervalued, and simultaneously, most overexploited assets. We see reasons for optimism. China is prioritising nature-positive business transitions to combat climate change, while surging global water demand – including for industrial applications – is spurring technological solutions and investment opportunities.
In 2024, the ‘Planetary Health Check’ report unveiled that six of its nine planetary boundaries had been breached, with a seventh breach imminent. Four of these – Freshwater Change, Land System Change, Phosphorus and Nitrogen Cycles, and Change in Biosphere Integrity – are vital natural systems. At the global level, progress is slow in restoring and protecting natural ecosystems, as well as in realising their true economic value. The private sector is providing some leadership, successfully turning nature-based challenges into business and investment opportunities.
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Our rethink nature theme favours firms whose business models work to restore or conserve nature, as well as materialise the value of nature assets. As one of our six rethink investments themes: longevity, new gen, technology, net zero, and infrastructure, which we see reshaping our investment universe, this theme aims specifically to contribute to the transition towards a nature-positive global economy. Since its June 2024 launch, rethink nature has proven to be one of our best-performing thematic investments1 against the MSCI World Index, as measured by the performance of stocks with material exposure to the theme, and selected by our Equity Research teams.
We see progress in nature-supportive investing at both regional and sector levels. China has become a global leader in sustainability. An estimated 65% of Chinese gross domestic product (GDP) is at risk from nature loss, according to the World Economic Forum. China is focusing on 15 nature-positive business transitions that the country estimates could create USD 1.9 trillion in annual business value and 88 million new jobs by 2030. In addition to its industrial efforts, the most recent Nature Index, a research-tracking database, shows that China now leads global studies in chemistry, physical sciences, Earth, and environmental sciences, and that in biological and health sciences it is second to the US.
China is focusing on 15 nature-positive business transitions that the country estimates could create USD 1.9 trillion in annual business value and 88 million new jobs by 2030
Freshwater takes centre stage
While multilateral efforts have so far focused on the protection of terrestrial biodiversity and ecosystems, freshwater is becoming a global priority. Water’s availability, either for drinking or as a component of manufacturing and cooling processes, is increasingly under pressure from pollution, climate change, and growing demand. Despite 71% of the Earth being covered by water, just 2.5% of the total is freshwater, and only 0.8% is both accessible and drinkable.
As urban areas and intensive agriculture expand their footprints worldwide, freshwater is increasingly contaminated with organic material, heavy metals, chemicals, and microbiological contaminants. This is creating a need – and a commercial opportunity – for firms offering solutions to detect, measure, and remove micropollutants. Firms in developed economies, in particular, are likely to pursue opportunities in advanced water technologies such as oxidation or ultraviolet treatment systems.
Firms in developed economies, in particular, are likely to pursue opportunities in advanced water technologies such as oxidation or ultraviolet treatment systems
AI and industrial water demand
New sources of demand are another important cause of water stress, with much of this rising consumption coming from manufacturing and technological development. For example, over the next five years, cooling new data centres will require the same amount of water as the US’s entire drinking needs, according to estimates by Ecolab Inc., a water purification company.
At the global scale, the solution is to re-use water in a more systematic way. We need a re-design of industrial processes to reduce or eliminate wastewater through closed-loop systems. For investors this will generate opportunities in water management solutions – such as sensors or advanced chemistry, and in predictive analytics. These can optimise water consumption in cooling systems by using non-drinking quality water. Other solutions include innovations in water-less cooling technologies, enabling data centres to operate in highly water-stressed areas.
Over the next five years, cooling new data centres will require the same amount of water as the US’s entire drinking needs, according to estimates by Ecolab Inc., a water purification company
As freshwater preservation and management take centre stage, investors are poised to be presented with a wealth of new investment opportunities. We believe the same will be true across the natural world and sustainable investing landscape. Today, real-world economics are pushing businesses towards nature-positive business models, as they recognise the need to build resilience to the escalating impacts of climate change. For investors, this is an opportunity to target more diversified returns thanks to climate-resilient portfolios, while helping to drive the transition to nature-positive economies at both the national and global levels.
1 Past performance is not a guarantee of future results.
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