Three environmental investment trends

Written by Jon Forster on 20th Sep 2017

This guest blog comes from Jon Forster, co-manager of Impax Environmental Markets, which manages or advises on approximately £7.2 bn1 in both listed and private equity strategies primarily for institutional clients.


At Impax we conduct our own proprietary research, which includes visiting the facilities of the companies in which we invest and meeting their managers. In doing so recently, we have identified three compelling developments in Environmental Markets.

  1. Electrification of transport systems

We have seen announcements for high speed and metro rail developments across the globe, including India’s $50 billion railway corridor project and a multitude of routes throughout Africa, often driven by Chinese funding and the use of Chinese equipment, construction, and operations expertise.

The electrification of transport involves more than rail. Many economies (China and India in particular) are pushing for more use of electric vehicles (EV).  Generous incentives for manufacturers and consumers aim to help achieve this goal, and the cost of EV technology is falling. In 2016 there was a 45 per cent increase in EV sales year-on-year globally1, and this trend looks set to continue.

  1. LEDs and next generation “connected” lighting

Light emitting diodes (“LED”) lighting markets are expanding at 15-20 per cent a year2, driven by energy efficiency regulations that are leading to the phasing out of incandescent and halogen lighting, and the falling costs of technology. However, LED penetration is still low at around 5 per cent but is expected to grow to 20 per cent by 20203, creating a significant investment opportunity.

We also believe that there is huge potential for “connected” lighting, which adds sensors to lighting infrastructure to collect, analyse and use data. Examples of applications include automated dimming, tracking of machinery or assets in a factory and targeted marketing to customers in retail environments.

  1. Water in the era of the “Internet of Things” and “Big Data”

Technological advances are changing the ways in which water is managed and used. Advanced metering solutions are growing at nearly twice the rate of traditional water meters. This growth reflects strong support from utilities, which are adding smart meters to their asset base on which they earn a regulated return, while also reducing their operating costs.

Longer term, we believe that utilities will focus on more effective management of their infrastructure, particularly reducing leakage rates and avoiding catastrophic failures through improved integration of sensors and monitoring technology.

Finally, smart pump technology is developing rapidly, including the launch of waste water pumping systems with integrated intelligence. These systems can adapt performance in real time and provide feedback to pumping station operators, increasing efficiency and reliability.


1www.liberum.com

 2 ftp://ftp.panasonic.com/whitepaper/ledvideomarketstudy_whitepaper.pdf

3 https://www.alliedmarketresearch.com/press-release/global-LED-market-is-expected-to-reach-42-7-billion-by-2020-allied-market-research.html