Capitalising on the longevity economy Investment Conference 2019 - - PowerPoint PPT Presentation

Capitalising on the longevity economy

Investment Conference 2019

Megatrends: urbanisation and waste management

Bertrand Lecourt

Portfolio Manager Fidelity International

Source: Fidelity International, 30 September 2018. Waterfootprint.org. Check your own water footprint: http://waterfootprint.org/en/resources/interactive-tools/personal-water-footprint-calculator/ https://www.watercalculator.org/wfc2/complete/

How much water in…

Water: it’s more than drinking and washing

Did you know? Food

Slice of bread Cup of coffee 250 ml beer 1 kg meat 1 kg cheese 1 egg

4 2 3 1 6 5

Water use example: Emerging market, Brazilian consumer average 5,600 litres of water a day per person

40 140 75 15,500 5,000 200

Source: Fidelity International, 30 September 2018. Waterfootprint.org. Check your own water footprint: http://waterfootprint.org/en/resources/interactive-tools/personal-water-footprint-calculator/ https://www.watercalculator.org/wfc2/complete/

How much water in…

Water: it’s more than drinking and washing

Did you know? Clothes

1 piece of paper A4 Car Computer Jeans 1 cotton t-shirt 1 pair of shoes

4 8 9 7 6 5

Water use example: Emerging market, Brazilian consumer average 5,600 litres of water a day per person

10 144,300 31,500 1,900 2,700 8,000

Accessories

“The story of water and waste is the story of people. There is no economy without water, no sustainable economy without waste management.”

Source: Fidelity International, 30 September 2018.

Source: Fidelity International. 1 United Nations, Department of Economic and Social Affairs, May 2018.

Waste and water needs are growing faster than global GDP

The planet needs water and waste management…always will

Water

Mega trend since the dawn of civilisation Sustained growth

Waste

The other side of wealth creation New source of growth Megatrend Common grounds Long-term drivers

c.70% of World population expected to live in Cities by 20501

Clean water & sanitation needs Need to manage waste More people living in cities Increasing middle class consumption in emerging markets Water intensive goods More waste generated Higher wealth & consumption Ageing infrastructure in the western world / new projects in emerging markets Network repairs and new build Investment in waste solutions More infrastructure pressure High standards of healthcare regulation create added value for new services and technologies Outsourcing and new markets Outsourcing and new markets Regulation & health needs Fresh water is becoming scarce and waste becomes a resource New technologies and solutions Use waste as resource Resource & scarcity

Source: IMO, https://www.hexaresearch.com, August 2018

Global ballast water treatment systems (BWTS) market

The introduction of foreign species is considered to be one of the five major threats to aquatic biodiversity

Example of regulation: ballast water treatment

50 100 150 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Container Ships Dry Bulk Carriers Tankers General Cargos

Source: McKinsey & Company, Water 2030 Global Water Supply and Demand model; agricultural production based on IFPRI impact-water base case. Existing withdrawals based on 2010 agricultural production analyses from IFPRI.

Water use increases with population Aggregated global water gap by 2030, billion m3

Water gap is increasing - driven by a growing need for food, goods, energy and health

0% 100% 200% 300% 400% 500% 600% 700% 800% 900% 1000% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2025 Water Withdrawals (projected) Water Consumption (projected) Population (projected) Percent growth from 1900 baseline

More volume

Source: Fidelity International, Shikomanov 1999, US Census bureau 2011.

3100 4500 3500 800 1500 700 600 900 2800 100 Existing withdrawls 2030 withdrawls Basins with deficits Basins with surplus Existing accessible, reliable, sustainable supply Relevant supply quantity is much lower then the absolute renewably water availability in nature Surface water Ground water Agriculture Municipal & domestic industry 2% CAGR ~40%

WATER GAP

4200

Source: Fidelity International, Global Water Intelligence 2015 Survey.

Integrated water tariff ($/m3) vs GDP/head ($) vs population size (bubble)

Room for global water prices to grow - water prices offer significant upside in developing countries

Denmark Australia Germany UK France Canada United States Poland Singapore Spain Brazil Portugal Japan Italy Switzerland Netherlands New Zealand Sweden Belgium Philippines Argentina Chile Tunisia Turkey Russia Korea, Rep. Mexico China India $1,000 $10,000 $100,000 $-1.00 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00

Log Scale GDP/Head ($ 2015) Drinking & Waste Water ($/m3)

Average price (drinking + w aste water)

More Price Upside

Source: Fidelity International.

Investing in the water value chain Focus on all industries exposed to the water cycle

Raw water source Rivers, lakes, sea, aquifer sources, etc.. Treatment/ purification (chemical, filters, bacterial, etc…) Storage (dams, lakes, reservoirs, water towers, etc…) Transport/ distribution (network) Supply (metering, billing, etc…) Water release Rivers, sea, lakes, etc… Irrigation/agriculture/farming

~70%

Water quality, tests, metering Plant design, municipal & industrial planning, engineering, water related services Intake (Pumping, valves, desal, etc…) Municipal/ domestic use

~10%

Energy, power, industrial, commercial (incl. oil & gas, mining & other)

~20%

Bottling, drinking market Release Waste water treatment & recycling

Source: Fidelity International, ISWA: The International Solid Waste Association. October 2013.

Past and projected global waste generation Projected waste generation by region (SSP2, business as usual)

Waste market to double in the next 10 years. The next green gold - inflection point with significant global growth

2 4 6 8 10 12 1900 1925 1950 2000 2025 2050 2100 SSP1 SSP2 SSP3 Waste generation (millions of tons per day) Waste generation (millions of tons per day) 1 2 3 2010 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Sub-Saharan Africa East Asia Pacific Europe & Central Asia South Asia Latin America & Caribbean Middle East & North Africa High Income & OECD countries

▪

Three projections to 2100 for waste generation spell very different futures. In the first Shared Socioeconomic Pathway scenario (SSP1), the 7 bn. population is 90% urbanised, development goals are achieved, fossil-fuel consumption is reduced and populations are more environmentally conscious.

▪

SSP2 is the ‘business as usual forecast’, with an estimated population of 9.5bn and 80% urban.

▪

In SSP3, 70% of the world's 13.5bn live in cities and there are pockets of extreme poverty and moderate wealth, and many countries with rapidly growing populations.

Source: Fidelity International, OECD, 2015.

Municipal waste in kg/head/year vs GDP/head ($) vs population size (bubble)

Waste generation increases with wealth ‘Waste side story - the other side of consumption

Algeria Australia Austria Belgium Brazil Canada Chile China Croatia Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hong Kong SAR, China Hungary Iceland India Italy Japan Korea, Rep. Latvia Lithuania Mexico Morocco Netherlands New Zealand Norw ay Peru Poland Portugal Romania Russia Singapore Slovak Republic Slovenia Spain Sw eden Sw itzerland Thailand Tunisia Turkey UK United States

1000 10000 100000

• 200

200 400 600 800 1000 1200

Log Scale Waste kg/head/year GDP/head More waste volume

Source: National Geographic, June 2018.

Global plastic production by industry (in millions of tons) Cumulative plastic waste generation and disposal (in millions of tons)

Plastic: a good example of the waste market

1950 1960 1970 1980 1990 2000 2010 2015

100 200 300 400 1973 oil crisis 2008 recession

Building and construction 72 million 35 years Less than six months Packaging 161 million 3 years Consumer products 46 million 5 years Textiles 65 million 8 years Electrical 19 million 13 years Transportation 30 million 20 years Industrial machinery 3 million 5 years ◄ the average time plastics are

used before they’re discarded

Other 52 million includes health care and agriculture Total 448 million tons produced in 2015

The first plastics made from fossil fuels are just over a century old. They came into widespread use after World War II and are found today in everything from cars to medical devices to food packaging. Their useful lifetime varies. Once disposed

• f, they break down into smaller

fragments that linger for centuries.

5,000 10,000 15,000 20,000 25,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Primary waste generated All waste discarded All waste incinerated All waste recycled

Today Tomorrow (2050)

Source: Fidelity International, http://advances.sciencemag.org/. Production, use, and fate of all plastics ever made Roland Geyer, Jenna R. Jambeck, Kara Lavender Law. 2017.

(1950 to 2015; in million metric tons)

Global production, use and fate of polymer resins, synthetic fibers and additives

100

Primary production 8300 In-use stocks 2500 primary Discarded 4900 Incinerated 800 Recycled 600 Secondary 100 100 500 700 300 4600

Source: Fidelity International.

Waste stocks in the value chain

Commercial, construction & industrial waste Municipal waste Hazardous waste

Oil, medical waste, e-waste, nuclear waste, etc…

Transport/logistics

HW collection Grouping platform

Source Air pollution

Air quality management, pollution control, filters

Waste treatment

Composting facility Sorting and recovery facility Waste to energy Recycling units HW treatment Stabilization / landfills

Output

Landfills Clean air Energy (Power, gas, heat) Secondary raw materials Paper, wood, plastic, ferrous and non-ferrous metals etc… Agricultural fertilizers Refuse-derived fuels (RDF) Secondary raw materials Oil, solvent, noble metals, catalysers, rare earth Municipal service ▪ Street cleaning ▪ Bins collection ▪ Sewage cleaning

Services

On-site industrial services ▪ On-site sorting, recycling, treatment, ▪ On-site collection ▪ Industrial cleaning Hazardous waste (HW) services ▪ On-site HW management ▪ Industrial maintenance ▪ Remediation Pre-sorted collection Drop-off centre Transfer stations Traditional collection C&I collection Recyclable collection Non-recyclable

Source: Fidelity International, Waste represents BNP Paribas Global Waste Management Index, Water represents S&P Global Water Index, World represents MSCI AC World

• Index. 30 September 2019. All indices represent total returns in USD.

Lead drivers supporting water and waste

1 2 3

Population growth Urbanisation rate Infrastructure gap

4 5 6 7

Scarcity and resources Health issues and regulation Scarcity and weather

8

Wealth creation and consumption Few global players

Historical performance

Water Waste World

50 150 250 350 Jun-05 Sep-06 Dec-07 Mar-09 Jun-10 Sep-11 Dec-12 Mar-14 Jun-15 Sep-16 Dec-17 Mar-19

Water and Waste Indices vs MSCI ACWI

Source: Fidelity International, Bloomberg, 30 September 2019. Waste Index represents BNP Paribas Global Waste Management Index, Water Index represents S&P Global Water index. All indices represent total returns in USD. Custom index performance measured using monthly rebalance.

Investment opportunity

50 100 150 200 250 300 350 400 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19 Rebased to 100 30.09.14 - 30.09.15 30.09.15 - 30.09.16 30.09.16 - 30.09.17 30.09.17 - 30.09.18 30.09.18 - 30.09.19 Global Waste Index

• 3.3

14.1 18.9

• 1.0

11.9 Global Water Index

• 2.5

18.9 13.6 3.8 12.0 MSCI ACWI (N)

• 6.7

12.0 18.6 9.8 1.4 MSCI ACWI Water Index Waste Index

Source: Fidelity International, Bloomberg, data collected on 292 stocks in the investment universe. As at date: 31 December 2017.

Total market cap size ($m) vs investable stocks Average market cap ($m)

Sustained new investment opportunities in water and waste. From 30 to ~300 stocks since 1990 and growing market cap

~300 investable stocks, x10 since 1990

Approximately ~10 new stocks per year on average, (The chart does not take into account stocks that have been taken over)

$3.5bn avg mkt cap x5 since 1990

The average market cap has increased steadily over time as the sector has grown, from $650m in 1990 to $3.5bn today. 50 100 150 200 250 300 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Number of stocks Mkt Cap in $m $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: Fidelity International, 31 December 2018. For illustrative purposes only. Opportunity set shown is representative of typical criteria, but may change from time to time in

• rder to ensure desired investment characteristics are achieved in line with the fund’s investment objective as stated in the prospectus.

Impact monitoring and ESG Actively focused on impact investment

For illustrative purposes only

Annual impact Based on amount you wish to invest Cumulative impact

From start date of your investment

Important information

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