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the latest analysis of green and ethical investment

7 billion people on the planet creates investment opportunities

The UN have estimated that today, October 31st, is the day that the population reaches 7 billion. Experts disagree about whether this is a day to be celebrated, or that it represents the inevitability of resource scarcity and inability for the world to live within its means.
Either way, the changes in population and global demographics are affecting investment opportunities, and some investment funds are taking note.

Global population has been growing consistently since, and grows at a rate of around 70 million a year, the UN estimated that the 7 billionth baby would be born today, and the child chosen to represent this was Danica May Camacho, who was presented with a small cake by officials from the UN. Predictions vary, but population is expected to continue to grow and could reach 9 billion by 2050. As pointed out by this comment article in the Guardian, it is not population alone that raises the scarcity issue, but its interaction with per capita consumption.

Population and Consumption

As population grows, overall consumption tends to grow also, there will simply be more mouths to feed. However, population growth at the moment is coming mainly from developing countries, who do have lower per-capita consumption than developed countries, but their standards of living are rising rapidly. As millions of children are being born in India and China, they are also expected to consume much more over their lifetimes than their parents. If this joint growth in population and consumption outweighs any consumption decrease from declining populations in the developing world, then we are facing a problem of scarcity.

Technological Progress

There are some, such as Jeremy Grantham, who see this situation through the eyes of Thomas Malthus, who believed that sooner or later population will be limited by the scarcity of resources. However, critics of Malthus, whose argument still applies today, rely on technological innovation to ensure we do not run out of essential resources. The original critics were vindicated by the Industrial Revolution, and a more recent example is the Green Revolution in crop produce, however, there are still stocks of resources which we rely on greatly, such as fertilisers, coal and oil, that we are slowly diminishing.

Investment Opportunities

This increasing scarcity is the main driver for many of the investment themes on Worldwise Investor, particularly Agriculture, Timber and Clean Energy. The idea is that in the long run these increasing pressures will inevitably lead to higher prices and profits for companies providing these essential products and services. There are gains to be made from investing directly in companies that cater to demographic changes, such as health and insurance companies, or companies that provide services for the elderly. Another area that will benefit from this phenomenon is the area of efficiency; this could take many forms such as energy efficiency, water efficiency or fertiliser efficiency. The gains from efficiency are both short term and long term, particularly energy efficiency where companies can see financial benefits over even a few months, whereas we could suffer the results of over-zealous energy use for centuries or longer.

Fund context:

Funds that take an active approach to investing in demographic changes include some from the Worldwise Investor Multi-Thematic section such as IM WHEB Sustainability, Henderson Global Care and Industries of the Future, and CIS Sustainable World Trust.

There are also environmental funds, some focusing directly on climate change, others taking a wider approach, these are listed in the Worldwise Investor Environmental Theme and include Cheviot Climate Assets and Schroder Global Climate Change.

Another approach is to focus on a specific theme such as Timber, Agriculture, or Water, such as Pictet’s thematic range, or to take a fund that integrates all of these themes such as Pictet Environmental Megatrend Selection.

Related funds:

Quilter Cheviot Climate Assets
CIS Sustainable World
Henderson Global Care Growth
Henderson Inst Global Care Managed
Henderson Global Care UK Income
Henderson Industries of the Future
FP WHEB Sustainability
Pictet Agriculture
Pictet Clean Energy
Pictet Environmental Megatrend Selection
Pictet Timber
Pictet Water
Schroder Global Climate Change

Useful links:

Worldwise Investor: Environmental Theme

Worldwise Investor: Multi-Thematic

Worldwise Investor: Paradigm shift in commodity prices

Worldwise Investor: History of Green, Ethical and Responsible Investing

Worldwise Investor: What is sustainable investing?

Yale 360: Revisiting Population Growth - The Impact of Ecological Limits
Guardian: World's 7 billionth baby is born
Economist: Demography - A Rale of 3 Islands

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Louise Fallonall articles

Louise Fallon starting working for Worldwise Investor as an intern over the summer and has written a number of articles during that time.

Louise is studying for a degree in Mathematics and Economics BSc at London School of Economics and Political Science, and graduates next summer.

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