Andrew Pitt: How responsible investing can help solve problems and turn a profit

28 Jan 2020 Expert insight

Andrew Pitt from Rathbones says there is a huge area of opportunity for charities looking to invest in sustainable businesses.

Responsible investing isn’t all about the risks. Increasingly, people are starting to cotton on to the massive challenges that face our society and they are demanding change. We believe this will be a huge area of opportunity for charities looking to invest in sustainable businesses.

Businesses have an enormous part to play in addressing big societal changes. They are the conduit for everything — from our food to our electronics, from keeping the lights on to how we get to work in the morning. The opportunities are great for companies that can find solutions to the world’s problems, particularly with technology. 

Everybody wants to invest in technology companies and every company wants to be one. For example, by squeezing a fruit packaging business into a tech company’s clothes, Juicero won $120m of venture funding. It turned out that Juicero’s $400 Wi-Fi connected machine was essentially a juice-box squeezer. Its fruit smoothie sachets worked better if you simply used your hands — especially if your Wi-Fi happened to be on the blink. This is just one of countless cautionary and typically hilarious tales.

An exciting development

Trustees especially, since they’re managing endowments for the benefit of generations to come, need to think beyond the latest fads. We think it’s helpful to hunt for ways that software and modern gadgets can solve the world’s problems that are related to industry and agriculture. Some of the most exciting developments take place in what many consider humdrum sectors.

Water heating isn’t exactly a sexy subject, but it combines two of the most important fronts of the resource efficiency fight — water and energy. Some companies in this sector are leading the way in electric, gas and solar appliances, with innovations that slash power bills for people and businesses alike. Heating water is energy-intensive, so quality boilers can significantly reduce the day-to-day emissions of households and small companies.

As the population grows — and developing nations become richer — the demand on the Earth’s fresh water is expected to grow significantly. By 2030, global water demand is forecast to be 40 per cent higher than sustainable supply unless we change our practices dramatically, according to the UN Environment Programme.

Water treatment businesses have a huge role to play in improving water quality and reducing the strain on our most precious resource. Water treatment is an area that is expanding rapidly and should continue for years to come.

Thankfully, there is plenty of scope to streamline how we use water. In the US, almost a fifth of fresh water supply is lost through leaking pipes and theft. In Brazil, such wastage accounts for nearly half. That could be a big opportunity for smart-metering companies. These digital tools help households and businesses keep track of their water use, saving money and water.

By far the greatest use of water is for growing and raising the food we eat. Watering the fruit, nuts, grains, grass and animals that are destined for our stomachs accounts for somewhere in the region of 70 per cent to 80 per cent of all the water we use worldwide. Technology can have a massive impact here as well.

One Silicon Valley company is tapping into this need with location, tracking and land survey services. Think the highly calibrated machines that engineers use to take exact measurements of ground levels and ensure buildings match the plans. Rather than simply throwing water and nitrogen around liberally, farmers can be much more sparing, saving them money and helping conserve the world’s resources. Technology like this is not only an exciting investment opportunity, but it really gives us hope about our ability to reduce our impact on the planet.

It’s not about companies that ‘pivot’ to tech — that pretend to be something they’re not. You need to look for those companies that are taking good technology out into the world to solve real problems.

We’ve written more about the growing trend of US companies embracing sustainable practices in our publication In pursuit of green, and why we see responsible investing as a big opportunity for long-term investors in Responsible capitalism: benefiting society and investment returns.

Andrew Pitt is head of charities at Rathbone Investment Management 

This content has been supplied by a commercial partner. Rathbone Investment Management is the overall partner for the Charity Awards.  

 

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