As investors, consumers, and corporations acknowledge, water is vital for human life, as well as most economic production. At the same time, it is probably one of the most under-appreciated assets in the developed world. Since the dawn of the Industrial Revolution, human population has grown 9x, the world economy 100x, and global water usage nearly 20x. By the middle of this century, population is projected to rise from 7 to 9 billion, the economy to grow 4x, and water use to increase more than 50%. The majority of growth will occur in developing nations, requiring new water infrastructure; therefore, investment will be required in developed nations to update and modernize old water infrastructure.
As water demand rises, supply is growing scarce due to overuse, pollution, urbanization, and climate change. At present, 1.2 billion people lack access to clean drinking water and 2.6 billion to basic sanitation; by 2050, the number of people living under “severe water stress” will increase more than 200%, amounting to 40% of the world population. The price of water-related assets will rise due to physical scarcity, infrastructure spending, and regulatory enforcement. As a result, supply chains will be disrupted, demand will grow for efficiency technology, forward-thinking companies will outperform the competition, and long-short investors will be able to capitalize from a growing, changing industry landscape.
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In the past decade, corporations have poured billions of dollars into sustainability projects, seeking savings through energy efficiency and pursuing innovation in the field of clean technology. Meanwhile, government agencies have supported environmental initiatives of their own, touting the public benefits of a greener society. But the question remains: how has the green movement impacted the pockets and perspective of the Average American worker? To answer, we focus on case studies in three spheres: green infrastructure, alternative energy, and electrical power. In each of these fields, respectively, the Empire State Building, the Marcellus Shale Region, and the San Francisco Bay Area provide visible examples of sustainability’s powerful capacity to generate well-paying and accessible jobs, even in tough economic times. The comprehensive work on the Empire State Building demonstrates the variety of projects—from window refurbishments to elevator upgrades—involved in green retrofits. Meanwhile, with the natural gas ventures in Marcellus, an entirely new industry has come to life, profoundly affecting the jobs landscape in the region. Finally, the smart grid development in the Bay Area highlights the convergence of manufacturing and industry with new technologies in the field sustainability. As the 2012 Presidential Election heats up, we’re hearing the same questions over and over again: how will the candidates create jobs? What will they do about the unemployment rate? Perhaps encouraging green jobs is part of the answer.
Energy efficiency measures, alternative fuel sources, and smart grid updates are all frequently heard “green” buzzwords related to electricity. While we often analyze the profitability and sustainability of such new initiatives themselves, we rarely think about how they will interact with the existing de-regulated electricity industry and related financial markets. In this report, we explore the main divisions of the sector—generation, transmission, retail, and distribution—and how that industrial structure has created markets for the trading of electricity as a commodity. After taking a look at standard market conditions and basic trading strategies for power, we examine particular shocks to the marketplace—Japan and Germany’s decisions to shut down their entire nuclear fleets—and their impact on energy prices as well as the fuel source mix. We touch on how unique industry characteristics will determine the success of—and perhaps be changed by—the growing movement toward sustainable energy generation/usage. Lastly, we highlight other important financial markets tied to power: weather and carbon. We hope that sustainable investors use this report to more accurately determine the potential for environmentally responsible innovations by viewing them in a broader financial/industry context.
Many Americans consider their lifestyles impervious to the weather. Other than the decision to bring an umbrella to work, each day brings the same routine, rain or shine. However, this summer’s record-breaking drought made millions re-think that assumption. Weather patterns and events are transforming in fundamental ways due to global climate change. Though by itself it is not evidence of climate change, the corn belt’s worst drought in over half a century certainly reminds us how vulnerable our society remains to the forces of Mother Nature. With those forces poised to become fiercer and more unpredictable, the industries most impacted by the weather — food, agriculture, energy, and water — are bound to experience turbulence. In this report, we examine the tools, companies, resources, and public policies intended to “weather-proof” our existence and provide us with a consistent stream of essential goods and services in spite of weather extremes. After providing a brief background on the Farm Bill and the agricultural industry landscape, we analyze how they’ve responded to the current drought, along with previous disasters. The report also details the major industry players’ and related markets’ performance, as well as points out several relevant conservation initiatives and opportunities in sustainability. Our purpose is to highlight the profound effects of climate change on the American economy, help investors pinpoint alpha amid subsequent major industry/market fluctuations, and showcase the prospects for profitable water and agriculture-related environmental solutions.